Disclaimer: I have a lot of links in this article. If you click any of the links, the only form of compensation I may receive is a virtual hug (I can only dream) and nothing else. These are my unbiased recommendations.
Most people have heard the phrase, "you have to walk before one can run." This is true with most aspects of life, including investing.
The phrase has one inherent principle behind it that many overlook. Walking is equivalent to "starting". In other words, no matter what you do in life, you have to actually start the process.
Investing in the stock market gets a bad rap because people make automatic assumptions when they hear these words. Two of the most prominent assumptions are 1) investing in the stock market is for the rich or the gamblers and 2) investing in the stock market is too complicated for me to understand.
If no one has told you otherwise, let me be the first. These beliefs are false.
In an attempt to make investing more approachable, I have laid out these four steps you can follow immediately to start your investing career.
One. Figure out where you stand financially.
Technically, you can start investing before you take this first step. This is fine as long as that investing is being done automatically through an employer-sponsored retirement account (such as a 401k or 403b). But, if you do not quickly find out where you stand financially, you may be forced to withdraw money or take out loans from your retirement account, which can have severe negative effects on your financial future.
So, with this first step, you need to do two things. First, figure out how your money has been spent over the last three months. If you need help with this, you can follow my four steps on budgeting.
The purpose of this first step is to make sure you are consciously aware of how you are spending your money. When we did this for the first time, we were genuinely shocked at how much we were spending on food costs. And as I previously mentioned in an earlier post, legitimate tears were shed when we had to face our spending habits. This process made a lasting impact on us though, and we have continued to make conscious spending decisions.
The second step you need to do to figure out where you stand financially is to calculate your net worth. If you need help with this, here is how we calculate our net worth.
Just as with the first step, this second step can be emotionally draining as well. Just remember, you are not doing a net worth statement to compare yourself to others. You are doing a net worth statement to compare your current self to your past self.
In other words, if you update your net worth once a year, you will be able to notice if the efforts you are making are beneficial or not. Then, if changes need to be made, you can make those changes before your financial life gets too out of hand.
Two. Focus your efforts on becoming financially literate.
This step is crucial, even before you talk to a financial planner or advisor. What you might quickly realize as well is that you may be able to handle your investments on your own. However, needing someone in your corner may change as your portfolio grows.
Here are the resources I would recommend as a starting place (NOTE: This is not an exhaustive list as there are many other great resources out there. These are just the ones I find myself gravitating to and recommending most often):
Books - The Simple Path To Wealth by JL Collins, The Psychology of Money by Morgan Housel, Rich Dad Poor Dad by Robert Kiyosaki, The Millionaire Next Door by Thomas Stanley
YouTube Shows/Podcasts - The Money Guy Show, The Debt Free Guys, Mile High FI Podcast, Marriage Kids and Money
Approachable Twitter accounts to follow that regularly post great content on investing - @Invest4finance, @WomensPF, @SteveOnSpeed, @caitmackcs, @SteveWagsInvest, @DebtFreeGuys, @WealthLetters, @thewealthdad
Blogs, other than mine - J.Money (The Miley Cyrus of Finance), JL Collins, Mr. Money Mustache (One of the GOATs of the FIRE movement), A Purple Life (Talks about personal finance, but also talks about other fun topics), Retire Before Dad, The Plutus Foundation (rounds up the best weekly personal finance articles and showcases them every Friday), Apex Money (Kind of like Plutus, they round up the best personal finance articles, but they do so every weekday)
This list may seem overwhelming, so start small. If you have Twitter, start following these accounts and let your feed be filled with financial educational content. Have these podcasts or YouTube videos on while you workout or clean the house. Buy just one book (I do highly suggest starting with The Simple Path to Wealth), and finish it before buying a second one. Finally, read just one interesting blog post a day from a content creator you trust (I definitely trust the ones above).
You do not need to run before you can walk. You can start small while building your financial literacy foundation. Just make sure to start.
Three. Figure out your financial goals.
Another way to say this - find out why you want to start investing for your future. I figured out my why in my second ever post. There are a few things you need to keep in mind when finding your why. Here is an excerpt from a previous post I wrote that you may find beneficial in finding your why:
"I strongly believe the main thing you need, other than money, for retirement is to know your “why”. At first glance I know this can sound cheesy, but it will help you from feeling FOMO (“fear of missing out”) during retirement. The deeper your “why” can be, the greater chance you have to land smoothly during retirement.
One way to find your “why” is by answering the following question, “why do I want to retire?” If you have a gut-reaction, superficial answer at first, dig deeper. The most obvious answer might be, “so I do not have to work again.” This is great, but why do you not want to work again? Do you want more TIME in your life to do the things you want? If yes, what specific things do you want to do more of?
Once you narrow down your “why” as much as you can, start figuring out whether you need a traditional “retirement” to achieve your “why” in life. You may find you can be truly happy in a non-traditional “retirement” where you work ten hours a week, or half the year, and still have time to do what you want, when you want."
Four. Actually start investing.
You can analyze anything to death, but if you do not start the official process, it defeats the purpose. Investing is the same way.
After becoming more financially literate, you can make an educational decision on whether you need a financial advisor or financial planner in your corner. If you think you do, here is a great list of questions developed by The Money Guy Show that you need to ask your potential advisor or planner.
No matter what you decide, if you do the research, I am confident that you all will make the right decision for your situation. Every situation is different, so do not feel shame or anything of that sort when deciding the right path for you and your family.
Just start.
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