Even the most skilled investors sometimes miss important steps in their investing journey. Knowing the basic building blocks of investing can save you from a $1 million mistake (like I first made years ago). This strategy is built to help you expand your wealth-building potential. From beginner to pro, these are 5 important steps to help anyone with their investing journey.
Get ready to see your wealth grow– let’s dive in!
The 5-step Order of Operations for Your Investments
1. Establish a financial plan.
A survey found that only 39% of Americans have a written financial plan. Which makes sense because who doesn’t love risking their financial future with no navigation or GPS to guide your way?
In case you DO care about your financial future, you should probably start here.
The best plans include determining your goals, time horizon, and risk tolerance.
Got that together? Great.
2. Create an emergency fund.
Are you tired of hearing about emergency funds yet? Well maybe if more than 37% of Americans had an emergency fund we could stop talking about them.
Or did you know that 60% of Americans don’t have enough savings to cover a $1,000 emergency expense?
So yeah, emergency funds are a big deal. Getting out of living paycheck-to-paycheck is a big step in the right direction.
An emergency fund is set aside funds for an emergency (I am looking at you, tech layoffs ). These funds should be easily accessible, preferably in a High Yield Savings Account, and should cover 3-6 months of your emergency expenses.
3. Maximize your employer-sponsored retirement accounts.
If your employer offers a match on your retirement account, you better be cashing in on that. It’s basically free money and you are growing your financial future.
One in four contributors misses out on their full 401(k) match.
A 401(k) match is one of the best employer perks you can take advantage of. Why would you want to miss out on it? There’s a reason it’s so high in the order of operations.
4. Open a brokerage account.
Choose a reputable brokerage firm, open that Roth IRA or Traditional IRA, bonus points for investing in a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs).
I like Fidelity, but Vanguard is great too.
There are different ways to plan your budget, but the majority of millionaires invest at least 20% of their income in stocks, bonds, and mutual funds.
Some people might even be able to get a little crazy and invest 60% of their income.
But in case someone hasn’t told you lately, every small bit counts. 5% of your income? 10%? Amazing.
Get it invested because the more time invested = the greater the compound interest.
The stock market has historically returned an average of 10% (which is going to be a greater return on your money than paying off your low-interest debt or stashing it away in savings!).
5. Continuously monitor and adjust.
Regularly review and adjust your investments to ensure they align with your financial plan and goals.
According to a study, investors who regularly monitor their investments have 1.58 times the wealth accumulation rate of those who don’t.
This step also includes continuing to learn.
You did that (hopefully) by reading this blog.
You are going to learn even more by reading up on money and money mindset (like our post about how the Fear of Being Average is likely hindering your finances and your ability to make an extraordinary life).
And by talking with people who are steps ahead of you in their financial journey.
Personally, I didn’t have family to teach me these things.
I spent hours and hours learning the ins and outs of personal finance, and have now coached thousands of people on how to reach their financial goals.
If you are ready to learn more, I have a free investing class where we will cover what I like to call the “lazy method” of investing (which also happens to be the proven, highly profitable way to invest) and how you can get started literally as soon as the class is over. You can learn more about it here.
Congratulations! You now have a solid understanding of the 5-step Order of Operations for successful investing. Financial knowledge IS power. I hope these steps help you feel empowered to take control of your financial future and make informed investment decisions.
Have you already started on your investing order of operations? What step are you?
Want to know why something didn’t make the top 5 cut? Send me a DM on Instagram and let’s chat about it!