Investing can be a path to financial freedom. Over time, your investment portfolio can provide you with a reliable source of income, potentially enough to even retire early. But, if you are a newlywed, how do you find the money to get started? And, once you have to disposable income to begin, what should you do?
The Best Advice for Newlyweds About Investing
While it may be tempting to jump into the world of investing right away, the best advice for newlyweds is to make sure you are financially fit before you start. It usually doesn’t make sense to focus on investments if you are carrying a lot of debt and don’t have an emergency fund, so it’s wise to get those areas in order first.
Ideally, you should eliminate your high-interest debt first. If the amount you pay in interest exceeds what you could earn on an investment, then you are effectively losing money by investing. On average, the stock market, as a whole, returns between 7 and 10 percent. So, if you have a debt that comes with an interest rate above that, get rid of it before you begin investing.
Similarly, having an emergency fund helps you avoid high-interest debt should disaster strike. Aim to have three to six months of living expenses in a savings account as a security buffer, as these accounts are highly accessible during a crisis.
Begin with Company-Sponsored Retirement
If you have access to a company-sponsored retirement account, this is usually the easiest place to start. You can generally contribute directly from your paycheck, making it highly convenient. Plus, if your employer offers a match, you are effectively gaining access to free money.
In some cases, it is wise to invest in your company-sponsored retirement account when a match is available even if you have high-interest debt or don’t have a fully funded emergency savings account. Since you don’t get the matching funds without investing yourself, the long-term gain may make it worth it.
However, it’s important to note that some company-sponsored retirement accounts are fairly limiting. You might not have many investments to choose from, so you’ll need to do some research if you want to make the most of it.
Open a Traditional or Roth IRA
Traditional and Roth IRAs are other forms of retirement accounts. They both allow you to select investments to help secure your financial future, and they each come with unique tax benefits that can make managing your current or future tax burden easier.
A lot of financial institutions have IRAs available. For example, TD Ameritrade, Ally Invest, Wealthfront, Betterment, and Fidelity have retirement account options. Many banks and credit unions, including large national institutions and local ones, may offer them. Even USAA offers IRAs to members.
You’ll need to do some research to figure out which option is best for you, as your unique situation does play a role. However, it’s always wise to start with a retirement account over other forms of investing, ensuring your financial future is secure.
Explore Index Funds
Beginning investors can often benefit from exploring index funds. An index fund is either an exchange-traded fund (ETF) or mutual fund that closely tracks a specific target benchmark index, like the S&P 500.
Often, index funds are cost-effective options. They usually have lower expenses since they are passive in nature. Additionally, they often outperform actively-managed funds over the long-term, allowing you to earn more from your investment.
Index funds also provide a level of security. There is automatically some diversification, significantly reducing the level of risk.
Companies like Fidelity and Vanguard provide investors with access to a range of low-cost index funds, making it easier to jump into the world of investing that doesn’t involve retirement.
Try Robo-Advisor Apps
There are a ton of robo-advisor apps with strong reputations today. Many of them allow you to start investing in stocks easily, even if you don’t have a lot of money to contribute each month.
One of the most popular options is Betterment. There is no minimum deposit requirement, and you can invest as little as $10 at a time, making it fairly easy to get started. Wealthsimple also has no account minimum and gives you investment options that align with your values and not just your financial goals.
SoFi, the company that has been helping student loan borrowers lower their rates, also has an investing option. SoFi Wealth has a low account minimum, just $100, and provides access to additional information that can help you plan your career.
Ultimately, investing can easily be in the reach of newlyweds. Just make sure you are financially fit first, then use the tips above to get started as an investor.
Do you have any advice for newlyweds who want to start investing? Share them in the comments below.
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