More than half of Americans are invested in the stock market in some form or another, whether through a retirement account (IRA, 401k, 403b, etc.) or through individual stocks or mutual funds. For our family, investing was something that we knew we needed to do if we ever want to retire (or be financially independent), but the concept was pretty intimidating.
Thinking tactically, we invested up to our employer's match from year one, earning a 100% return on our investment immediately. If your employer offers a match, you really have to find the money in your budget to take advantage of it. You're getting an immediate raise when you do. The FIRE community calls this "paying yourself first."
How that money is allocated, however, can make a big difference in the long-term value of your portfolio. We have an account manager with our school’s retirement account who has helped us choose our investments based on risk tolerance, income goals, and time left until retirement. Investment into your retirement should be automatic, but the allocations should not be. Ask questions and get educated about the fees associated with your funds. Know what you are getting yourself into. This video from John Oliver is insightful. I am not at all qualified to recommend how you should be saving for retirement, but I can confidently say that you should be doing it if you're not already. Do it.
In addition to our automatic retirement savings, we have also started using credit card cash back to our advantage with this fairly easy two-step process.
1. We have this American Express card. It gives us 6% cash back on streaming services and groceries, two categories that we already spend money in every month. We then pay our balance down to zero every month. Do not get this card unless you can keep it without carrying a balance.
2. Then we redeem our cash back and use it to invest in stocks/mutual funds using Robinhood, an app with zero commissions/fees for trading. In this way, we aren't spending any extra money each month, but we are beginning to develop a little pile of money. I've invested in dividend-paying mutual funds. They're on the conservative side.
If you sign up using the links above, you'll get a pretty decent sign-up bonus from AmEx and a paltry little stock from Robinhood.
This extra pot of "free money" gives me the flexibility to learn about investing without taking money from my family's monthly coffers to learn how to invest without touching our retirement savings (that is OFF LIMITS for me). I have friends that do options trading; that's something that I'm beginning to look into as we have more to work with.
What are some lessons that you have learned over time as you have invested?
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