Unfortunately, we can’t all major in business and sit through hundreds of financial management lectures, but, luckily for you colliegettes, I have. Although I can’t promise that I have taken all of the advice given to me, my favorite young professor once told me that if she leaves all of her money invested as it is in the market today, she will be worth over a million dollars when she is ready to retire. Can you say Louboutins?
Save as much as possible, as early as possible.
We can all admit that we tend to prioritize happy hour over saving money, but it’s no secret that setting aside just 5-10% of every paycheck can begin to add up really fast. Even small amounts of money earning really low interest can be compounded to make large sums after a long period of time. Not to mention that investing something is better than nothing at all. The key variable that makes investing while you’re still young so valuable is time.
Invest in a Roth IRA.
I know it’s hard to imagine that you need to start planning for retirement when you can’t even decide what to make for dinner tonight. For most of us, financial terminology sounds like a foreign language, so fyi: a Roth IRA is just an individual retirement account that gives you tax free income when you’re ready to retire and withdrawal from the fund. The major perk of this type of account is that its all your money, so you can tap into the stash at anytime or leave the money in there until the day you die without being penalized or forced to withdraw. Most importantly, you need to start a Roth while you’re young because there are limits on eligibility. Basically, if you make too much you can’t contribute and you are missing out on a great opportunity.
Buy some stock.
If you’ve seen Wolf of Wall Street you probably learned everything you need to know about the stock market. Just kidding. The two major stock exchanges in which securities are bought, sold, and traded in the US are: New York Stock Exchange (NYSE) and Nasdaq. When you buy stock for any company within either of these exchanges, it’s like you are buying a little tiny piece of the company itself. After a company’s IPO (initial public offering,) people like us can officially purchase this mini ownership and eventually recieve dividends due to the success of the company. For example, if you invested just $5,000 in Apple’s IPO, it would be worth more than $1.3 million today.
Get educated and take risks.
It is a financial fact that riskier opportunities, if successful, yield much bigger rewards. Of course, making investments is not easy so having some basic knowledge about the market is necessary to determine which opportunities are the best. I know we would all rather sit in bed on Sunday morning watching Netflix but, I promise, picking up the Wall Street Journal and reading just a few articles will change your whole outlook on the world around you. Investing is like gambling; if you are not well informed, you may lose your money.
Keep your debt low.
The most challenging problem for people in their 20s, besides saving, is owing. For some reason young people, myself included, don’t understand that if you don’t have the money in cash on your checking account, you shouldn’t be so quick to swipe your credit card. What most of us fail to realize, is the high interest rates being tacked onto your credit card bill each month. As if credit card debit isn’t bad enough, we tend to be drowning in student loans, which also acquire interest while or shortly after being in college. Learn to live within your means and pay back any money that you owe as soon as possible.
Find a mutual or hedge fund.
If all of this information scares you, take a deep breath. You don’t have to do it on your own. Investing in a mutual or hedge fund is like joining a money club. People like you and me have the opportunity to pool their money together into funds and then allow professionals to evaluate the market and invest that money where they think it will be the most successful. This creates a way for your money to be spread across the market in different industries. In the real world, this strategy is known as diversification, which is known to greatly increase the chances of making a profit.
I hope you realize by now that investing is the best way to make your money grow, besides owning your own business. As appealing as it may sound, it’s important that you remember that sometimes you will fail. The market will continue to fluctuate and some companies will eventually go bankrupt but as the saying goes, “you miss 100 percent of the shots you don’t take.”