Investment is usually the last thing you want to think about when you just got your first paycheck. Blow it all! Some clothes….a decent watch…the car…a killer mobile and the flat screen. Hmmmmmm. OK, for a few months, but if you don’t back off a bit, then, those things will own you and you’ll spend your life paying off your history at 20% more than the “bargain” price you bought it for! Think about investment….as part of your life NOW. Believe me…while your friends are doing the monthly credit card scramble, if you start an investment program setting just a small part of your money aside, you will have the freedom they will never even imagine!
Set a vision of what you want. Money is not the thing...it's the dream you can make happen. So you're not into money management...you are into dream realization! The earlier you get started, the faster your dreams will happen. Based on your vision, write down your goals, not money goals, but "I want to be" goals or "I want to be able to" goals. By the way, the yacht dream is mine already....it's used up....get your own dream!!!! Motivation is your vision of the dreams and that is really powerful.
Educate yourself on investment. It is important that you start learning early so you have solid information on which to make your investment decisions. Start by reading the quarterly reports and annual reports of the company you are working with. Start tracking their stocks. Get to know the other companies in your field of work. Read their reports. Warren Buffet says buy what you know. Hey....and you'll also be able to feed back to your company information about the performance of competitors. This may give you an edge, to be noticed and may lead to earlier promotion. That extra money in your paycheck may just be the starting base for your portfolio. Meet your bank investment advisor. They will be able to provide information and you can ask some of your questions as well. Read books in your library or financial sections in the newspapers. Or search for information online.
Find a mentor. Get someone who is not interested in selling you a product or a service, someone who has done well in investing. There is always one in your family or circle of friends or at work. Ask people what they do about investment. Listen to their experience and find out what you need to do to prepare yourself to become a better investor.
Determine your risk tolerance. How much risk are you prepared to take? Fear and greed drive the markets...if you have a problem with these, stay in forgiving investments like mutual funds or bonds. Look for investment products that are within your level of risk. Get to understand these products and how you can get better returns from these. Remember...this is supposed to be fun, and it really can be, but not if you're terrified. Maybe start with something safe to build up your confidence.
Decide how much you can afford. Start with the amount you can regularly take out from your bank account without pain. 10% is a good target but to get started, anything will do. Cut back to one major coffee a day and you will have an investment starter kit. Look at your goals as well. If it is something you really want to have sooner, set aside more money to reach it in less time. Every dollar you save is really $1.20 because you're not paying off credit cards. If you just want to start saving for retirement, a safe way to start is to contribute to your company's pre-tax investment program like 401K for Americans or RRSPs for Canadians. Many European countries have similar tax incentives. You will be surprised at how much a little amount put in regularly accumulates in a period of time.
Open an investment account. Shop around for better performance and deals that suit your own unique requirements. Some financial institutions offer to set aside a regular amount to put in your investment account and once accumulated, you can then decide to put it in stocks or whatever funds. Meanwhile, this will earn interest.
Start investing. If you want, you can first start with a trial investment account. You can build a trial portfolio of stocks you choose yourself based on your research. Invest in what you know well. If you are ready, go for it. You learn faster when the stakes are high. You also learn how to manage your emotion as you get engaged. You can start by buying the stocks of companies offering Dividend Reinvestment Program (DRIP). As the dividends come in, they automatically buy more stock. Most of these companies are well established and very conservative and will allow you to buy one stock (through a brokerage) to get in the game.
Once you have one stock, the company will allow you on a regular basis, at a date they set, to buy extra stocks. You can arrange for your bank to transfer money regularly to this company to buy more stock without paying fees. This was very useful when fees were high but with a veritable Niagara Falls of online brokerages now on the web with cheap fees, you have other options. Stick to the ones you know are reliable and will not ask you for a minimum investment amount to open an account. By the way, if you keep all of your financial work with one bank, you can leverage your good customer status into better rates or fees.
No matter what decisions you make, the key is to START NOW. Now is the best time. Procrastination in this will only keep you farther from your financial goals and a stable financial future...and will keep pushing your dreams further out. Once you have started, KEEP AT IT. Increase the amount each time you get a raise. With compounding interest and time, in a few years, you will just be surprised at how much money is in your portfolio...and the freedom you have to make your dreams come true.