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7 Simple Principles to Invest Money Wisely No Matter Your Age

You can achieve your financial goals by using simple, but tried and true, investing principles. Laura covers 7 key concepts to grow your net worth over time no matter if you're an investing newbie or have been at it for decades—even if you don’t have much to invest.

By
Laura Adams, MBA,
March 15, 2017
Episode #489

Page 1 of 3

7 Simple Principles to Invest Money Wisely No Matter Your AgeMany people mistakenly believe that investing money and building wealth is a complicated game that’s completely out of their reach. While you can make investing complex, I don’t recommend it because using a simple strategy works just as well.

No matter if you’re starting to invest for the first time or have been at it for decades, you can grow your net worth over time using simple principles and habits. In this article, I’ll cover tips to achieve your long-term financial goals no matter your age—even if you don’t have much to invest.

Free Resource: Retirement Account Comparison Chart (PDF download)  - get this handy, one-page resource to understand the different types of retirement accounts.

7 Simple Principles to Invest Money Wisely

Use these 7 simple principles to save and invest money wisely:

1.    Start investing as soon as you begin earning.

One of the most important factors in how much wealth you can accumulate depends on when you start investing. There’s no better example of how the proverbial early bird gets them worm than with investing.

Starting early allows your money to compound and grow exponentially over time—even if you don’t have much to invest.

Compare these 2 investors, Jessica and Brad, who set aside the same amount of money each month and get the same average annual return on their investments:

Jessica

  • Begins investing at age 35 and stops at age 65 
  • Invests $200 a month  
  • Gets an average return of 8%  
  • Ends up with just under $300,000

Brad

  • Begins investing at age 25 and stops at age 65 
  • Invests $200 a month  
  • Gets an average return of 8%  
  • Ends up with just under $700,000

It’s a huge mistake to believe that you don’t earn enough to invest now and will catch up later. If you wait for a someday raise, bonus, or windfall, you’re burning precious time.

Because Brad got a 10-year head start, he has $400,000 more to spend in retirement than Jessica! But the difference in the amount Brad contributed was only $24,000 ($200 x 12 months x 10 years).

So never forget to start investing as early as possible. It’s a huge mistake to believe that you don’t earn enough to invest now and will catch up later. If you wait for a someday raise, bonus, or windfall, you’re burning precious time.

Neglecting to invest even small amounts today will cost you in the long run. The earlier you start saving and investing, the more financial security and wealth you’ll have. Please remember that you’re never too young to begin planning for your future.

But what if you didn’t get a head start on investing and now you’re worried about running out of time? You’ve got to just dive in and get started. Most retirement accounts allow for additional catch-up contributions to help you save more in the years leading up to retirement, which I’ll cover in a moment.

See also: 5 Best Investing Tips to Make More Money

2.    Use automation to stay disciplined.

Because it’s so easy to procrastinate saving and investing, the best strategy is to automate it. This is a simple, but tried and tested, way to build wealth. It’s why workplace plans like a 401k work; the contributions come from automatic payroll deductions.

Automation works because it anticipates that you could easily go off the financial rails and be tempted to spend money that you shouldn’t. To be successful, you must be realistic about ways you could slip up and then create solutions that force you to maintain good habits.

Have money automatically transferred from your paycheck or bank account into a savings or investment account every single month. When you set up consistent, automatic deposits, you put money aside before you see it or get tempted to spend it. It’s a barrier you set up that allows you to outsmart yourself so you manage money wisely.

Automation works because it anticipates that you could easily go off the financial rails and be tempted to spend money that you shouldn’t. 

Putting your financial future on autopilot is truly the best way to simplify your life and slowly get rich.

See also: 8 Tips to Invest Without Too Much Risk

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