A financial plan is an essential
tool for making smart investing decisions. A good
way to start is to write down your financial goals
for the next year, 5 years from now, and 20 or 30
years in the future. Don't be overwhelmed if the
list of things you want seems unattainable, or if
you're not sure what your goals are in 5 years — let
alone 20 years down the road. Putting them down
in writing can help you make sense of your priorities
and anticipate what steps you'll need to take to
meet your goals. After all, investing is about making
the most of the money you have now to produce more
money in the future.
The amount of money you can afford to invest
depends on your income and your lifestyle, but many experts recommend
that you try to invest 15% of your salary. If you can't swing
that much yet, don't worry that you are not going to be a successful
investor. See if you can get started by dedicating at least 5%
of each paycheck for investing.
1. Make a personal
budget, if you haven't already, and think about some
categories in which you could cut expenses. Take a
hard look at your savings, income, and any other
assets you might have.
2. You might want
to make some big changes to free up money for investing,
such as moving to a less expensive apartment, getting
a roommate, or selling your car and taking public
transportation.
3. Smaller adjustments
to your budget can also be a big help. Try cutting
back on the number of meals you eat out, renting videos
instead of going to the movies, or skipping your daily
$3 latte.
