Money Master The Game
by Tony Robbins
⏱ 14 minutes reading time
🎧 Audio version available
Budgeting
If you’ve made up your mind to start investing money, the next step is to determine exactly how much of your income you should set aside. Now, this ultimately depends on several factors, like your salary and your monthly expenses, but a general rule of thumb is to take out roughly 5 to 10% of your monthly income as soon as you start earning.
While it might sound difficult, trust me, this is the perfect percentage to start with. Take some time to determine exactly how much money you can afford to set aside. Budgeting is the first step to investing because once you’re aware of the financial liberty you have, you’ll be able to look at the investment options best suited for you – instead of investing your money somewhere you can’t afford.
Pay Your Debts
Now, this isn’t a conventional investment tip, but trust me, you will only be able to really start saving money after you pay off the money you owe. According to seasoned investors, the best thing you can do for your financial future is to start paying off the money you owe on things like credit cards.
Assess your total debts and see how they’re keeping you from investing a larger part of your income into something worthwhile. Once these monthly payments stop preventing you from putting a larger amount of your money into your investments, you’ll be able to create wealth for yourself without constraint.
What Are Your Financial Goals?
When you’re investing, make sure that the assets you spend your money on align with your financial goals.
If you have savings, but you have no idea what those savings are for; list all the possible ways you could use this money. Maybe you can use it after retirement, maybe you can use it to buy your first home. The thing is that you save money differently for different financial goals.
Saving up for your retirement is an entirely different process than saving up for a down payment. So, make sure you know what you’re saving your money for and then divide your money accordingly.
Diversify
Now, once your budget and expenses are sorted, the next step is to figure out what assets you should invest in. No matter what investment strategy you choose to adopt, diversification is the key to making sure that your returns are profitable.
Diversification means you spread your investments across a wide range of assets to reduce risk and increase profitability. The idea here is to not put all of your eggs into one basket. Don’t get caught up in fad investments and products with brief lifecycles, where their value shoots up and declines immediately.
Allocate your money across different investments based on their risk and your budget to make sure that you make the most of your money.
Use Your Benefits
When you’re in your 20s, you might not pay much attention to your employee benefits. A lot of companies offer channels through which you can start investing with possible discounts and tax benefits – making the process much easier. Nearly all workplaces also offer a retirement savings plan that helps you save a considerable amount on your taxation and save for your future.
What’s more, with a retirement savings plan, you earn compound interest on your investment. This means that your money grows faster because interest is calculated on the accumulated interest over time, as well as on your original investment.
Compounding can create a snowball effect since the original investments, plus the income earned from those investments, grow together, helping you attain financial security.
Higher Education
One of the worthwhile investments you can spend your money on is higher education. Investing your time and money in a degree that will help you move up your professional ladder and open doors to tons of opportunities to grow your wealth.
So, if you’re interested in pursuing a career that requires a degree, use some of your savings to get a college education. Trust me, this is one investment that’s guaranteed to have returns.
Be Tech Savvy
Long gone are the days when investing was less accessible and markets less liquid. With the rapid rise of digitization, investments have become easier than ever – especially for the younger generation.
With so many online tools and techniques available at your disposal, make full use of them and build your knowledge base, so you’re confident in your decisions, instead of being forced to rely on other people. And if you’re really looking for guidance, there are tons of robo advisors on the internet that do practically all your investing for you!
From creating your portfolio, reinvesting your dividends, and minimizing your taxable gains – robo advisors offer you the best hands-off investing experience, which you can use to get ahead.
Take Risks
Do you know how people say that you should be scared of volatility when it comes to investments? Well, I’m here to tell you that your 20s are the time when you should be taking calculated risks with your money. As a younger individual, your risk tolerance is generally higher than, let’s say someone who’s in their mid-30s and trying to provide for their family.
Historically speaking, stocks, bonds, and mutual funds have higher risks, but at the same time, they also offer potentially higher returns than lower-risk investments, making them a common choice among seasoned investors.
Stocks are considered one of the riskiest investments, as there is no guarantee of making a profit. But if you have the patience and time to weather storms in the market, accepting some financial risks can lead to greater rewards in the future.
Future Investments
One of the most useful investment tips is to never stop investing. If you’ve set up a successful retirement account and have a well-diversified portfolio – that’s great. But, do you have enough money saved up for future investments? Maybe ten years from now, there’s a new trend in the market.
How do you capitalize on it if all your money is already invested elsewhere? Which is why you should always have extra funds set aside to make full use of these opportunities when they arise.
Take Your Own Path
Remember that investments don’t look the same for everyone. While stocks, bonds, and mutual funds are common and great options to start investing in your 20s, they are not your only options. Branch out of the market and consider other options, like real estate, that aren’t directly related to stocks, so that you have some sort of safety net to fall back on when the stock market gets shaky.
However, just because someone you know has already invested in a rental property at the beginning of their career, doesn’t mean that you have to empty your savings to do the same. Consider crowd-funded investments, fix-and-flip properties, and real estate investment trusts as alternatives to improving your portfolio while sticking to your budget.
The only thing that matters is that you’re consistent with your investment strategy. Even if you’re only able to invest a little money, with time, these small amounts have the potential to add up.
Know When To Sell
Lastly, after you’ve figured out your investment strategy, diversified your portfolio, and saved up for future investments, all you need to do is understand when the time is right to sell your assets and gain returns.
The key to being a successful investor is to keep you calm intense situations. You don’t want to panic and sell your stock holdings too early. Hey, I get it. When the market crashes out of nowhere, it’s completely normal to get nervous. But, once you learn how the entire process works, you’ll be able to make better decisions and know exactly when to sell stocks or properties without ending up with losses.
Buying and holding – and then buying more – is the strategy you should operate with when you’re a young investor. Trust me, it will all pay off in the end. That’s a wrap for 11 Simple Investment Tips for Young Professionals in Their 20s.
What Is Snapreads?
With the Snapreads app, you get the key insights from the best nonfiction books in minutes, not hours or days. Our experts transform these books into quick, memorable, easy-to-understand insights you can read when you have the time or listen to them on the go.
