Start saving immediately
According to a 2018 survey, 67% of Americans say that there is a good chance they will outlive their retirement savings. Obviously, this means many Americans are just not saving their money or started saving a little too late. When you pay yourself first, you are committing to saving for your future. A good tip is to set aside money from your pay check and forget about it. Throw it right into a savings account and let it be your spending money later. Future you will thank you when you realize that this money will sustain you long after you retire.
Invest in low cost index funds
Index funds are relatively inexpensive and allow investors to essentially set it and forget it. Even one of the greatest investment minds in human history, Warren Buffett, recommended this strategy saying “I think it’s the thing that makes the most sense practically all of the time.” Investing in index funds, like the S&P 500, takes very large companies and condenses them into a well-diversified shares that are money making machines.
Contribute to your 401k
If the company you work for offers a 401k program for you to contribute to, it is an absolute no-brainer to do so. Some companies will match your contributions and give you the opportunity grow your money in a way that helps you in the long run. A 401k is a great way to build your money and starting early is the key. With an average annual return of 5% to 8%, it will grow more the earlier you start so time is of the essence. This compounding interest is basically free money for your retirement.
Treat yourself when appropriate
I am not saying you should save absolutely every penny. It is important for your financial success if you are able to incentivize your saving by spending on things that make you happy. Did you get a nice bonus this year? Don’t blow it all on something huge and neglect your savings. You worked hard for that money. Feel free to spend some of it on a nice night out or a new piece of tech you’ve had your eye on. You’re not a robot, you’re a human being and it is not unhealthy or detrimental to your savings to indulge every once and a while.
Reinvest your dividends
If you manage your own portfolio or someone else manages it, securities offer dividends for having faith that their stock is worth hanging onto. If you reinvest your dividends right back into your portfolio it is like receiving free stocks just for holding onto the ones you already have. If you take it and run with it then that money is not going to work for you to make more. Another play you can make is to reinvest your dividends into stocks that might be a little riskier because you’re essentially playing with money you got for free while you hold the stocks you’re holding for the long term already. Riskier stocks can really payout if your smart about what you invest in. However, in the event they do not pan out, it was dividend money that does not deplete your portfolio.
Take calculated investment risks
Doing your research on securities is one of the most important things you can do. You can afford to take a bit of a risk if the research you are doing is sound. Investing based on hunches, especially when the stock you are interested in is on the riskier side, is a very dangerous practice for any investor. Take a look at performance over the life of the stock, financial records and news surrounding the company you are contemplating investing in. Do your due diligence and you will save yourself a lot of headaches when investing in companies you feel could explode.