Masterminds Think Alike
I was connected to Rachel (@MoneyHackingMama) through a mastermind group created by Mrs. Miller of MillersonFire.com.
Rachel’s valiant efforts to blow up her website in a short amount of time and get her social media going full speed on Pinterest and Instagram are very impressive.
What’s even better is the content that she is creating. When you review the posts on MoneyHackingMama.com you notice that the edgy content is practical for moms AND non-moms. As someone who doesn’t have children, I love that there are articles just as relevant to me as they are to men or moms.
Rachel’s vibe and writing style are appealing to many people, but you’ll notice it’s uniquely geared towards 30-somethings, like her… and me. No wonder I found so many interesting things on her site despite not having children.
The other more impressive thing is how transparent Rachel is being about her earnings from her blogging journey. The monthly income reports are definitely going to get interesting real soon!
I was very excited to have Rachel join in Financial Wellness week as a late entry. And she wanted to talk about investing, something we can’t have enough articles about!
For me, investing is still the most mystical topic of all the financial wellness topics being posted during financial wellness week.
So here’s Rachel dropping knowledge about investing…
Getting Started with Investing
My name is Rachel and I blog over at Moneyhackingmama.com. I’m a married, 30-something working mama to a toddling baby boy (Money Hacking Baby). I am passionate about challenging assumptions and finding creative ways to save, spend, and make money. My big goal is for me and my husband (Money Hacking Papa) to be able to retire by the time we are 40 with a net worth of $2 million. If everything goes according to our plan, that will be about nine years after creating my blog. Currently, we live in Southern California and save around 50% of our income as part of our active pursuit of early retirement.
I write to document my family’s journey to financial independence (FI). I hope my blog will help others learn from our successes, and avoid our mistakes. Ultimately, I hope my blog inspires people to think differently about money.
In this post, I’ll share with you some basic first steps to get started with investing.
Step 1: Start with Your Goals
I’m a huge proponent of goals. Before you do anything you need to know why you’re doing it. So, the very first step for investing is to ask yourself what your goal is.
Money is simply a tool that can help you make your dreams come true. Many people say they want to be a millionaire or have $10 million. However, they don’t actually need that much to live their ideal lifestyle.
So, rather than trying to think about how much money you think you want or need, instead, start by asking yourself what your ideal life looks like. Give yourself some time to meditate or daydream. Try to envision a perfect day, a perfect month or a perfect year.
Ask yourself questions like:
- Where am I living?
- What am I wearing?
- Who am I surrounded by?
- What am I eating?
- Do I have a car, and if so, what kind?
- What does my day look like?
Next, after you’ve written down a picture of your ideal life, try to put a cost to that life. Think about how much your dream house costs. Ask yourself “How much would it cost to raise the number of children I want to have?” Think about how old you want to be when you retire. The more specific you can get the better.
Step 2: Pay Yourself First
Once you know what your goal is and how much it will cost, you need to start saving for it. The best way to do this is to “pay yourself first” and prioritize saving for your goals by making that the first thing you do when you get paid. If you’re in debt, the first step would be to pay your debt off so you can start to set money aside for your future and your dreams.
My Secret Weapon: A Budget
Whether you are paying off debt, or you’re ready to put money aside, the best strategy I can recommend is to have a budget.
Many people see budgeting as something that restricts them and their spending. However, in reality, a budget is simply a tool that allows you to be intentional with your money.
A budget helps you see a clear and accurate picture of where your money is and where it is going each month. It also helps you prioritize your long terms wants and needs over your short term wants and impulse buys.
For example, before I had a budget, even with the best intentions to save, every month something would come up that I wouldn’t anticipate and I wouldn’t be able to save. However, once I sat down and really assessed my spending habits, created a budget, and started investing what I had leftover, I was able to save over $500,000 in a few short years!
Check out this post to see the exact steps for how I did it and how you can too.
Decide Which Investment Option is Right For You
Once you know your goal, and you’ve created a plan to pay yourself first then you’ll be able to decide which investment options are best for you. For example, if your time frame is less than 5 years, you’ll probably want to invest your money in something less risky like a money market fund or a high yield savings account. The tradeoff here is that your risk will be low, but your investment returns may not be as high.
On the other hand, if you are saving for retirement and you have a longer time period (over 5 years), investing in the stock market would probably be a good fit for you.
Many people don’t know how to get started with investing because they feel like they’ll make the wrong decision, i.e. they’ll pick the wrong stock. To deal with this, I simply suggest that you don’t pick individual stocks, but rather invest in low-fee index funds. This is what Warren Buffet suggests be done with his money once he passes, so take it from someone that’s much smarter and richer than I am!
Why low-cost index funds?
If you’re invested in a fund that has high fees those fees are going to eat away at your profit and destroy the power of compounding interest. Also, index funds are preferred because this allows you to mitigate your risk. For example, if you invest in one company, and then they go bankrupt, or are associated with a scandal, your entire investment can be destroyed quickly because of one problem. However, if you invest in an index like the S&P 500, your risk will be spread out over 500 companies. So, if one company is involved with a scandal it won’t cause your entire investment to be destroyed, just 1/500th of it or about 0.2%.
Other Investment Options
Other investment options include real estate as well as businesses. While these can also be fruitful they also have their own risk and can take more work.
For example, if you decide to purchase a rental property you would either need to hire someone to manage it for you, or you would need to manage it yourself which would take time. Being a landlord can also have headaches like dealing with tenants as well as repairs.
Furthermore, starting a business can have large upfront costs. While the upside can be huge, there is also a lot of risk involved as statistics show that most businesses fail within the first ten years.
Putting it all together
So, if you think index fund investing sounds right for you and you have at least $1,000 to invest, here are a few specific steps to get started via Vanguard which is my personal favorite place to invest.
To recap, make sure you start your investment strategy by knowing why you’re investing, and what you’re investing for. Next, find room in your budget to put money aside for investing and pay yourself first. Finally, choose which investment you’re going to make, and get started. One of my favorite things about investing in index funds is that you don’t need a huge amount of money (like you would need if you purchased a rental property). So, even if you’re nervous, you can get started with a few hundred dollars and see how comfortable you feel with your investment option.
Willing to share your goal and what your dream life looks like? We’d love to read about it in the comments below.
A special thank you to Rachel @MoneyHackingMama for taking the time to be part of Financial Wellness Week. You can find Rachel providing helpful financial wellness tips at MoneyHackingMama.com, on Instagram and Pinterest.
Featured Guest Bio:
Rachel is a married, 30-something working mama to a toddling baby boy. She is passionate about challenging assumptions and finding creative ways to save, spend, and make money.
She blogs over at Moneyhackingmama.com, and her big goal is for her and her husband to be able to retire by the time they are 40 with a net worth of $2 million. If everything goes according to their plan, that will be about nine from now. Currently, she lives in Southern California and saves around 50% of her income as part of her active pursuit of early retirement.
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