12/06/2024
Question from a follower: “What is needed as a young person to start investing or prepare to invest?”
Here’s the abbreviated version.
#1
Make sure you paid off high interest (credit card, for example) debt and have an emergency fund.
Typically we recommend 6-9 months of expenses in cash.
#2
Get a budget and figure out how much you can actually invest.
Remember you are putting this money into the market, which carries risk. Don’t invest it unless you can afford to lose it.
#3
Establish a goal and time horizon.
There can be more than one.
The goals people usually strive for are retirement, buying a house, sending kids to college, buying a second home, etc.
#4
Figure out which type of account you need, based on #1.
If you don’t need the money until retirement, look into a Traditional or Roth IRA.
These allow the money to grow with tax advantages, but you won’t have access to it until age 59 ½ (with important caveats).
If you need more flexibility and don’t mind forgoing the tax benefits, maybe a taxable brokerage account is the way to go.
#5
Figure out your risk tolerance.
You may need to enlist the help of a professional to do this, or there may be some online questionnaires you can take.
You need a process that tells you what your true willingness and ability to harbor risk are.
#6
Create an investment plan.
This is a very involved process.
If you are doing it yourself, you may want to consider a Roboadvisor or use investment tools.
If you aren’t up for going it alone, consult with a financial advisor.
The more money you have, the more valuable a great advisor will be for you.
That’s it, in a nutshell.
Remember, this is general guidance that can’t be interpreted as advice specific to any one individual.
If you’d like our specific recommendations that may apply to your situation, please set up a time to speak.
