How to Start Smart Investing
It’s commonly thought that in order to invest, you need a surplus of money to get started and make a profit. In reality, building a solid portfolio when investing begins with knowing where you currently stand with your financials, debts, and what you already have saved.
Building a Savings Account
The commitment to setting money aside in a savings account can provide reward in the long run. Savings accounts provide a place to put your money that needs to be separate from everyday banking needs, allowing you to have extra money set aside for future purposes such as reaching a savings goal, emergency purposes, etc. Additionally, when you want to move money in or out of your savings account, you can do so at a branch or an ATM, by electronic transfer to or from another account using the bank’s app mobile app (if provided), website, or by direct deposit. Transfers can usually be arranged by phone, as well. There are many options to fit what works with your daily schedule work for using this type of account.
Deal with Your Debts
Before you start investing, it’s wise to configure what your debt amounts are, and how best to diminish them. Debt can include high-interest rate credit cards, student loans that have interest tacked on, car payments, and more. If you are carrying high amounts of debt, it’s sensible to pay off what you’re able to before investing your money.
Invest Your Tax Refund
Each year with tax return season, we automatically spend the dollar amount we get back with our refund. Although you have your eye on a personal spend or extravagant vacation, consider other options of what to do with that chunk of change. If you notice that it’s difficult to save money throughout the year, consider setting aside part or all of your tax return as a way to kickstart investing.
Consider Your Retirement
A key component to saving and investing money includes ensuring that you have enough money set aside after you stop working. A top priority to planning for a well-set retirement is to take full advantage of your employer’s 401(k) plan, if one is provided, and continually increase your contribution amount over time. Many 401(k) plans allow you to invest with pretax dollars, reducing your tax burden in the year you contribute. With others, such as Roth 401(k)’s and IRAs, you contribute with after-tax income, but withdraw the funds without tax. This method reduces your tax hit on the year of withdrawal. In both circumstances listed, the earnings on what you invest accumulate tax-free within the retirement account. Even if your employer doesn’t offer a match on your 401(k) contributions, it’s still recommended to build your retirement plan through continuous contributions. The golden rule is to contribute 15% of your salary; however, any amount or percentage you’re comfortable with is a good starting point.
Investing your money can be complicated at times, but the basics are simple. Maximize the amount you save for retirement and your employer’s contributions. Minimize any debts, fees, and taxes as best as you can. Make smart choices with your spending and savings now to benefit your lifestyle during retirement.
ABOUT SGROI FINANCIAL
Sgroi Financial is a full service, independent financial planning firm proudly serving the Western New York area since 1971. We offer services that will help you achieve your financial goals including retirement planning, investment management, estate planning, college planning and insurance. We help individuals, families, retirees, working adults, young adults and business owners.
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