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5 Steps to Start Investing

· investing,compound interest,wage gap,retirement accounts,dollar cost averaging

Albert Einstein calls compounding interest:

 

 

“The eighth wonder of the world!”


We’ve all seen charts like the one below, where one person who starts early and invests for a limited time actually makes more than the person who starts later and invests for a much longer period of time…

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Even though we know and see charts like the above, I am still reading studies like the SoFi 2024 Women and Finances Survey that found that 64% of women and 47% of men have NEVER invested!

 

So what are the main reasons that the majority of women aren’t investing, according to SoFi’s Survey?


  1. Uncertainty and lack of knowledge - The survey says 43% say they don’t have the confidence to do it “right,” and they describe investors as “a finance bro. Very inaccessible to someone who doesn’t know all the terminology and ins and outs of the stock market” or “a person who is well-educated and knows the tricks of the trade of investing.” This is why I hosted the Financial Spark Series last week, and why all of the investment experts I featured on Friday were women…who were the opposite of a “Finance Bro!” Sign up for the Series and watch all 5 of the expert videos and dive into their work. Here’s an interview that I did with Chartered Financial Analyst and Investment Coach, Anjali Pradhan, about her reasons she left the “Finance Bro” world of Investment Banking and started teaching women how to invest:

 

Anjali has a LIVE training just for my audience coming up THIS Thursday, May 2nd about 3 Secrets to Investing in just 3 hours a YEAR. Check it out below!


 


2. Wage Gap, of course! - We hear over and over again that women, in general, make 82 cents for every dollar a man makes. (This of course doesn’t take into account women of color, who make even less than 82 cents.) So, of course, with less of an income, then women are thinking about covering their expenses each month vs. men who can take some “extra” income and apply it towards their retirement or investment accounts. So, let’s start to negotiate for higher pay and higher rates, ladies!

 

 

3. Women Worry More. According to the survey, 58% of women worry their money won’t last through their retirement AND they worry they’re going to lose that money, rather than gain more money to last through that retirement. However, this isn’t necessarily true. IN fact, because women tend to be more conservative investors, they don’t take risks that contribute to greater loss. Also, if you watch that interview with Anjali, she mentions that women have also had greater returns on their investments over men! (By the way, it’s the same thing for manifesting. Women tend to be better at manifesting than men.)

 

So, what’s the main issue here? The issue, like other goals (weight loss, working out, reading more, writing more, etc.) is the getting started part.


How You Can Start Investing (in the U.S.):


  1. If you work for a company with a 401(k), 403 (b) or any other retirement, tax saving account, start there! Start by putting in as much as your company will match. Let’s say they match 50% up to 10% of your income. Then, put in 10% of your income, so that you get that 50% match!
  2. Next, open up a Roth or Traditional IRA account at a discount brokerage (Fidelity, Charles Schwab, Ally Invest, etc.) or a Robo-investing firm, such as Betterment or WealthFront. Check with your accountant on whether you need the deductions now or not. If you need the deductions now, open a Traditional IRA and put in the max (either all at once, monthly or every time you get paid). For 2024, that’s $7000 if you’re under 50 and $8000 if you’re over 50. If you don’t need the deductions now and your income is under $161,000 if you’re single or $240,000 if you’re married filing jointly, then you may contribute the max to the Roth. You won’t get a deduction for this year, but when you’re ready to take that money out of the Roth, it’s all TAX FREE!
  3. Once the money is in any of the above retirement accounts, it still needs to be invested. This one seems like a no-brainer, but I’ve seen lots of accounts where the money is just sitting there doing nothing for years!
  4. As for where to invest, there are more specific and personal ways to analyze this (with a financial advisor professional, going to the brokerage of your choice like a Fidelity, Charles Schwab office and speak to someone or if you open an account at a robo-investment platform, answer a few questions and the software does it for you). However, a quick and easy general way to think about it is to subtract your age by 110. So, if you’re 50, then 60% should be in stocks or stock index funds and 40% should be in bonds or bond index funds. Many times you can tell the platform to automatically put your money 60% into the stock index fund and 40% into the bond index fund.
  5. Then each month, you will decide how much you want to contribute and then do so! There’s actually a technical term for it - dollar cost averaging - but you really don’t need to know what that really means. You just need to decide that every month, you’re contributing that same amount into your investment account, so transferring $10 (or whatever you designate) from your checking into that investment account, and then telling it to automatically split it 60/40, so $6 will go into the stock index fund and $4 will go into a bond index fund.

 

 

So the above is the super basic 5 steps to get started. I teach investments more in depth in my Financial Freedom for Creatives Club and of course with my 1-on-1 clients. Find out more about both by subscribing below. Also, as I mentioned above, Anjali is an Investment Coach. She’s based in Canada, so she actually understands both the U.S. and the Canadian methods of investing, so check out her workshop coming up this Thursday or if you’re reading this after the date, then go HERE for a recorded training.


With Love & Gratitude,

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