How to Invest – Part One on the Journey to Wealth…
After my longtime girlfriend from college emailed me again to ask how to invest her teacher retirement fund, I decided once and for all to start sharing more information about traditional investing here at Financial Woman.
Since I don’t invest money for a fee, what I offer is completely unbiased, and I share what I have learned from over 3 decades of personal investing myself.
Like anything else, the starting point for being a savvy investor is having at least a little basic information on the topic….whether you invest yourself or work with a financial advisor. This article is one in a series with some important information you’ll definitely want to know before you begin investing your money.
The reality is that before you can decide how to invest, you have to look at other factors and opportunities in your life.
The topic of finance is so huge, and investing your money is one part of that equation, although people often think investing in traditional investments is the one major element of wealth creation. Your financial health involves a healthy money mindset, creating positive cash flow, maximizing your income, and knowing how to invest strategically.
And these money topics are all intertwined along the path to financial freedom. So I like to encourage women to take one step at a time….
Smart investors know that the stock market is only one place to invest. Other investments include your own home, real estate rentals, your own business and other types of investments.
How to Invest – Principle 1
The first step to begin investing is taking a holistic look at your wealth plan and your life. Then, you’ll want to decide how much money to invest in more traditional investments from your total net worth. You’ll first want to take a holistic approach your your wealth.
For example, if you’re generating nice income streams from your own business, as many women are now, then this may deserve some of your capital to expand. And remember that equity in your own business is part of your net worth as an asset. Keep in mind that when you buy a stock, you are investing in a company so they can expand their company and make more money. Similarly, investing in your own business is an equally valid investment, but it’s often overlooked as such, especially by women who tend to undervalue their skills and businesses.
Here’s another “asset” you may have not considered that can be part of your overall “net worth” when considering how to invest moving forward: you. If you’re pretty sure you can make more money if you receive a certain degree or training, then this may be a smart investment. Increasing income can allow you to accumulate more wealth, while also enjoying your work and lifestyle more. Investing in yourself is every bit as valid as investing in stocks as an investment. While the cost of investing in yourself may take away from the amount in your wealth account in the short term, ask yourself if it will increase the amount in your wealth account over the long term.
So, how to invest all depends on where you are right now. Do you have a cash cushion of 9 to 12 months? Is your monthly cash flow positive so you can accumulate money to invest? What is your financial stiuation right now?
How much money do you have invested in your home? A home is a huge part of many investors’ net worth.
The starting point for knowing how to invest, then, is knowing how much money you have to invest right now, and assessing the best way to use that money to increase your total wealth long term.
The logical first step, then, is to know how much money you have, and where that money is now. Then consider the potential opportunities for that money.
This sounds pretty simple, but a lot of people don’t know their net worth for sure. Once you know just how much money you have, and where it is, you can make decisions about when and how to invest your money.
Net worth is financial lingo for how much money you have. It’s just calculating the difference between the value of what you own and the amount that you owe. This all sounds pretty simple, but here’s a common hurdle: Studies have shown that, crazily enough, this is one thing that people avoid more than anything else! This is crazy, since having money is so important…and good, right?
It’s crazy but true, and the reason people avoid knowing their net worth is because they have negative head stuff around their money that leads to avoidance, and it needs to be dumped. That’s why I created this free Wealth Creation Launcher to take you through this very first step. Besides, it’s fun and easy, but it’s life changing, too.
Get this powerful money mindset tool here now, and stay tuned for my next post on how to invest once you’ve gotten your mindset good to go, and your ducks in a row.