8 Investment Tips for Beginners - How Should They Spend Money Wisely?
(Posted on Apr 16, 2021 By M.K.B)
What is the investment? To put it simply, it is a way of savings that are used to complete your financial goals. Some
people think investing money is a tricky job or insecure way for money saving. But, it doesn't like that. There are
myriad ways for investments where you can increase your saving by getting good average returns.
In this blog post, we’ll walk you through with a few important investment tips for beginners and how they should spend money wisely. Let’s get started!
Here’s a few Important Investment Tips for Newbie
1. A Financial plan
A plan starts with what you want to do in the coming days. It could be your study plan, travel or planning to buy a house. Your first step will start after knowing your earning and spending. Your leftover after the spending will let you know what you can do.
Making a good plan should start with a properly defined goal. Always keep three “W” strategies. What, where, when can help you to make a proper plan. Making a budgeting plan is the first part to achieve your financial goal. So considering all the factors like income, expenses, upcoming return of expenses.
While making a financial plan, you can add in your plan long-term and short-term investment strategies, which will give you more ideas about your plans. Always keeping an extra source of money that can help you to accomplish your goals can be a wise choice.
2. Manage through the automation system
Once you set up the plan for the investment and savings, Now you need to manage each transaction of the money. It is as important as your financial goals. So, just leave it to your finance management on the automation bases system. In which available applications on the play store can track your every transaction and give you the complete report of your account summary. As a beginner, applications can help you more instead of managing the expenses, earnings, and pay cheque manually. The preset of category inside the application will let you know the complete detail of the money flow; alongside with tracking you will get the budget planning tips from the application as well.
3. Make short-term goals
Make a habit of small savings on each spending. Choose the best buy option in the market. Don’t rely on credit or any unexpected expenses. First, decide your goals. It may be buying a car or your upcoming travel plan. Start investing a lesser portion of your income based on your goals. Check the feasibility of your goals considering your income, spending, and any upcoming expenses. Then start investing the amount you need after a short period. You can invest the money in the portfolio if you have 4 to 5 years where you can earn the average return of 6% to 10% based on market health. Your short-term plan achievement always boosts your confidence for the next goal of an investment.
4. Make long-term goals
When you are investing for the long term, it means you are keeping your money to get the long-term benefits that can be your retirement plan of buying a home in the next 5 to 7 years. Your children’s education plan and paying off the debt is also counted as a long-term plan.
You can start saving as much as you can from your income to get the benefits of compound interest. If you keep aside $400 a month for 40 years, you will get approximately $ 1 million for spending with only a 7% average return.
So investing 10% to 15% from your income for the long term will help you to achieve your financial goal. In order to fulfill your long-term plan, you might be deprived of yourself to fulfill your wish list. However, it may be a wise decision based on your financial situation.
5. Choose investment funds with low fees and higher returns
Before choosing the investment plan, check the size of their fees, every plan charges different fees. By clicking on websites you can get the list of funds where you can check the fees and average return. For example, if you invest $10,000 for 30 years with an average return of 7%, instead of 6%, you will get near to $20,000. So, choose the investment plan wisely. Lower the fees higher the return you will get at the end of the plan. There are various options available where you can start investments. However, do research before the investment to avoid any money loss risk.
● High returns saving accounts
● Certificates of deposit
● U.S. Treasury bonds
● Real estate
● Series I saving bonds
All the investment options are related to the inflation rate and individual growth of the funds. Hence, choose wisely!
6. Buy a home
Buying a home is everyone’s dream, if you are young and wants to do investment, then you can start with investing in a house.
As early you plan to buy the home, you will get the more attractive offers from lenders with lower interest rates. If you are at 25 age you can pay a small amount as the principal amount and can start the process with several installments that suit you. But when you start to buy a home after 35 years here you need to pay a higher principal amount.
Otherwise, your installment frequency will decrease and the installment fee will increase. Apart from this, choose the proper location considering the future growth of the area, which enhances the value of your investment indirectly. Thus, plan to buy a home when you start earning and investing.
7. Choose and use the credit card wisely
Choosing the right credit card is equally responsible to invest the money in the right direction. In the market, there are a lot of options available for credit cards, which suits your requirements and provides you a low APR and low application fees. Along with these features, it’s pivotal to use the credit card responsibly.
Misuse of the credit card may ask you to pay charges or penalties on the late fees. Keep a credit card for emergency use only unwanted transactions may lose your credit score which impacts your personal or payday loan approval process or you may ask for a higher interest rate. Each spending through credit card returns you like cash back or points which you can redeem in actual money. Some sellers provide attractive offers on credit cards where you will get discounts or moneyback options.
8. Pay yourself
Paying yourself means rewarding yourself every month from your monthly income. The idea behind the “pay yourself “is saving the money for the long term as an emergency. It doesn't mean that you are earning monthly or daily or what the source of the income is. Here are some examples, which come under “pay yourself” are:
● Saving for the higher study
● Keeping the money for health insurance
● Saving as an emergency fund
● Keeping money for owning a car
Most finance experts always advise using the “pay yourself” strategy to make your saving habits at your early age.
Money is a necessary part of life. So, investing the money for savings or better earning is the secure idea to keep your future financially strong. It doesn’t matter how old you are, what your profession is. Starting investing as a beginner is a good thought for those who want to fulfill their dreams and keep themselves disciplined.