First Steps to Investing

Entering into investing is much harder than liquidating your investments.  Many people refuse to invest for much of their life, only to realize that their retirement dreams and plans can only be met by the aggressive growth of the stock market. Buying stock and following your investments is easy, but the first step is often the hardest to make for new investors. Below you will find tips and ideas that will help you get started buying your very first share of stock.

How Much Can You Invest?

Before you throw your life savings into the stock market, make a budget and decide how much money you'll be able to dedicate both now and in the future to buying shares. It may be as small as $100 per month or as high as $1000, but you should only invest what you can truly afford to lose. The best investment plans generally outline a specific dollar amount, either per month or per pay check, that will be invested in a predetermined selection of investments.

Examine What Your Employer Has to Offer

You might be surprised to find that your pension plan or 401k from your own employer has plenty of benefits. The human resource department should be a one stop shop for your future retirement needs. If you're lucky, your employer will even give you free money in the form of a 401k match. With 401ks, your employer promises to match a certain percentage of your pay that you save for retirement; this is just one way that companies give back to their employees, but many never take full advantage of the free money on the table. Enrolling in a 401k is a great way to get an instant 3-6% raise, as many employers will match either 50% or 100% of your investments on top of up to 6% of your earnings. If you make $50,000 per year and contribute $3,000 to a 401k, your employer would add another $3000 per year to your retirement savings with a 100% match.

Do You Have Everything Else in Line?

Before investing, it is important to make sure that you have budgeted for everything. Do you and your spouse currently have enough life insurance, and is the home safe in the case of disaster? Can you afford to live on a budget that is a few hundred dollars shy of what you normally make? Creating a budget of your incomes and household expenses prior to making any investment decisions is always a good idea. You'll know exactly how much you can afford to invest each period and feel safer knowing you're living within your means.

Know Your Goals

Plan on a small 4% yield after you hit retirement. With this in mind, you'll need $2 million in savings just to retire with a total income of $80,000 per year without calculations for Social Security or future pension payments. Knowing your goals before you invest will help you target your goals month by month as you invest. Online retirement calculators are a good way to see how much you'll need to save per month and what rate of growth you should attain to achieve your goals.