Many young couples spend more time thinking about when to buy a house or have kids rather than they do considering investment options or retirement. Besides government employees, only an estimated 17 percent of Americans will have some type of retirement pension, according to MSN Money. Your investment income can help you meet other financial goals as well, such as a buying a home or paying for your children's college tuition.
Determine whether you want to work with financial professionals or handle your own investments. Professionals can help you through every step of the investment process, but you will have to pay for their services. Some charge a percentage of earnings gained through investments, while others charge a fee per service. Find out what type of maintenance fees you'll have to pay the professional or the brokerage company. Fees can vary from one professional to another and may depend on whether the individual works as an independent agent or is affiliated with an investment company. If you understand finances, you may want to handle your own investments.
Come up with a financial game plan. You need to determine what your future spending goals will be. Do you want a house? What quality of life do you want when you retire? Questions like these will allow you to get a practical look at the amount of money you will need for your future. This amount can help you decide how aggressive you want to be in investing your income.
Factor saving money into your budget. If you don't have a budget, create one. Treat saving money as an expense; this will help you set aside funds every month. A good rule of thumb is to put 10 percent of your income toward your investment strategy, even if initially you have only a savings account.
Decide when and how you want to invest your savings. Diversify your investments to include stocks, annuities, bonds, exchanged-traded funds and mutual funds, according to AARP. Traditionally, mutual funds and bonds have a lower investment risk than stocks and annuities, returning more than a savings account but less than stocks or annuities. Purchase mutual funds and bonds from government and non-profit organizations raising money to fund community based products, such as new schools, roads or water purification systems. Stocks and annuities have a higher risk due to the volatility of the market, but may bring you the highest return on investment.
Look into your employer's retirement options, such as a 401k plan. The sooner you begin investing, the more money you will make through compounded interest, according to the U.S. Department of Labor. With a 401k plan, you can contribute a portion of your pretaxable income to the account, and your employer may match a percentage of your investment, according to CNN Money. You do not pay taxes on the interest earned by the 401k; however, you will pay taxes when you begin deducting the funds from the account.
Evaluate how much risk you want to take with your money. Your investment strategy may depend on where you are in life; for example, couples with two incomes and no children may find it easier to invest more money early on, before they start raising a family. The level of risk you are willing to take may change as well. If you are just starting, you may find it easier to gamble on higher-returning investments. As you near retirement, you may prefer to be more conservative in your investments.
Open the necessary accounts to begin investing. You may work with a mutual fund investment company or a financial professional, or you can do it on your own using online services that offer self-management options.
Monitor your accounts at least once a year and continually revise your investment plan. What works for you in the early years of investing may not be a great fit for you later. You'll want to make sure your investment strategy continues to meet your financial goals.
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