investing

Investment Decisions You Need to Make in Your 20s

investment decisionsOur 20s are a great time to be alive. They’re confusing, emotional and a little bit chaotic, but they’re also a lot of fun. 20-somethings are at the age when they need to grow up and become adults which is both exciting and confusing as we learn how to navigate our way through the real world. Money is a big part of that growing up.

Money mistakes happen when we’re young because we’re trying to juggle learning how to budget on our own, paying bills on time every month, making student loan payments and starting to save for our future. When I was in my 20s I was not financially responsible – honestly I was the farthest thing from it.

Instead of making smart investment decisions and pay off my student loans while starting to save, I decided to live larger than life and rack up over $50k in credit card debt. YIKES! Needless to say, that was a bad decision. However now that I’m in my 30s I’ve learned my lesson, learned how to properly manage money and I’m happy to say that I invest on a regular basis.

Not to sound like the Fairy Godmother, but I’m here to help you learn from my mistakes and make smart investment decisions in your 20s.

Here are five investment decisions 20-somethings should make:

Get informed

Don’t go into investing (or anything in life) with a blind eye. Research your investment options and start slow. There’s no need to invest a lump sum of cash into the same investment, especially when you probably don’t have a lot of money to spare.

In addition to researching the different investment options, it’s also a good idea to compare different account types and institutions. Just because you’ve had a checking account with the same institution since you were a teenager, doesn’t mean that institution is the best place to start investing.

Seek professional advice

A basic knowledge of the investment industry, your options and how market changes affect your account value, will help make smart investment decisions. Seeking professional advice can also help.

A financial advisor can recommend how to invest your money based on your goals and help you check in on those goals throughout the year. As your life plans change a financial professional can help adjust your financial plan to stay on track. A good financial planner will help you to get proper short term investments or other investment strategies.

Invest regularly

The best piece of advice I can give is to invest regularly and constantly through automatic transfers. From a budget standpoint, it’s a good idea to set up automatic transfers from your checking account to your investments on the same day as your paycheck. This way there will always be funds available and you’ll always continue to invest.

Contributing lump sums of cash when you have them (such as your tax refund or annual bonus) is also a great way to help your investment accounts grow, but investing regularly is the best way to continue saving. When you purchase investments continuously you’re buying in when the price is high and low because the market fluctuates daily. It averages out the cost and it’s a much more conservative investment strategy than contributing on one day, hoping the investment price is low.

Save for the short and long term

It’s OK to have more than one financial goal at a time. You can save for a dream vacation, pay off student loans and put money aside for retirement all at the same time. So often people only work towards one goal at a time and that doesn’t need to be the case.

Saving for multiple goals doesn’t mean you need to contribute the same amount of money towards all of them. Prioritize your goals and allocate the largest amount of your budget towards the goal you want to achieve first. Once that goal is achieved you can move on to your next priority or add a new goal into the mix. As life changes so can your goals and that’s a good thing.

What’s your best piece of investment advice?

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About the author

TK

TK is a Certified Financial Planner with over 15 years of experience in the banking industry. She started blogging in 2009 after the market crash. TK enjoys helping people plan their retirement, pay off debt, invest wisely, live on a budget and enjoy happy financial lives. You can see what she's up to on Twitter @TahnyaKristina.

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