Where the hell to start with investing in your early 20's
Quick background, I am turning 33 this month and have been investing in the market consistently since my early 20’s and a lot since my first job in 2013 that I started that had a 401k.
Most importantly for me starting off was just saving money. So many issues with going out, partying, eating out, everything to get in the way of just saving some money. The only real way I started and which all of you should do is at your first job, contribute to your 401k!
It doesn’t matter what job you have, if they offer a 401k, CONTRIBUTE! Even if there is not match, if there is a match offered and you are not contributing, you are basically giving away money. Example: If your employer offers a 4% match, 100% up to the 4% you contribute, you are getting a 4% raise for just contributing. You make $50k starting off, contribute 4% per year, that’s $2k you put in and your employer puts in $2k. Why not?!?!?
My first job I was investing in our 401k and to be honest it kinda sucked, but I knew putting money in there was the right thing to do in the long run. I had a whole spreadsheet made in excel with all the investments and ratings, etc. Little did I discover, when we had our first company meeting with the company that ran our 401k, people at my company were not contributing……..hence the high fees…. People had taken money out of it to buy a house, buy a car, etc. My mind was blown. I emailed all he guys I worked closely with and made sure they had a clue what they were doing. They were all around my age of 24 so I figured if I needed to save so I don’t turn 65 and am like Oh Shit, what do I do for the rest of my life since I spent everything and now have trouble finding employment. Which does happen more often than not, I will get into that in another post. But anyway I felt proud to get them all invested and interested in it which was just the starting point.
After that day I did another crazy thing and started actually looking into other ways to invest. I had a brokerage account, which I was lucky enough to have my dad setup for me when I was younger when his parents passed and left me a bit of money, which I didn’t know about until college, but really showed the power of compound interest, more to come on that. I opened a Roth IRA and just started putting like $20-$40 a week into it, any extra cash that I had basically. So a Roth IRA is an individual retirement account made with after tax contributions. Aka you pay taxes in your paycheck, then you put money into your Roth. The great thing is, you can take it out tax free. So any money you make you keep and pay no tax…..!
So there two starting points for any investor early in their investing career or working career. This is an easy way to save some money, get invested and get some money saved for your future at least. Plus your taxable income goes down when you contribute to a 401k. Again if you make $50k per year and contribute that 4%, your employer puts in 4%, you are at 8%, plus when you file taxes you are only paying tax on $48k. So there is your pretax savings with a 401k.
Quick side point to break this up is don’t try to get rich with penny stocks…..tried this, failed. Crypto could work for you if you understand it, but I don’t so I don’t risk my money with that. There are other ways to make money doing things, but these are easy compared and take less work. Put your money in an S&P 500 fund or Total Stock Market Fund. Just keep contributing no matter what, and by the time you are ready to stop working, you will have a nice chunk of change sitting there.
To detour back to the compound interest I mentioned earlier. So my wife thought you just lose money in the market. Literally as she saw her parents lose their jobs and a lot of wealth during the 08–09 recession. So she basically had saved a good chunk of cash and was making nothing in interest on it. So I told her just put it in a Roth and invest it. She was quite hesitant. The thing that clicked in her head was when I told her it is the opposite of your student loans. You pay them interest each month, but basically with investing, they pay you interest. Then all of the sudden she saw the light and has been investing ever since.
I will go into more stories and details about all of this, my wins, my big ass losses and the method that seems to be working year in and year out. There will be a focus on just the nature of making it a pattern to save, and make it a bill for yourself to save, just as it is a bill to pay your electric, water, rent, mortgage, car, etc. I will go into other methods and ideas we are testing at making income and also my current portfolio and where I am focusing my money. Along with people who possibly don’t make tons and tons of money, but are living more paycheck to paycheck, ways to cut some things and save a few bucks which can really help you out down the road. As someone told me one time, just put 15% of your Salary or income in your 401k for 30 years and you will be fine no matter how much you make.
Hope you enjoyed this a bit and maybe interested yourself in starting to invest as I will be posting more with this subject as I notice more and more people in my age group and below not having a clue what to do because student loans and life get in the way currently vs. what the future holds.