How to Start Investing My Money Now as Employee?

I am interested to know on how to invest my money now. I am just an employee receiving low salary per month. Which investment vehicle should I use? My paycheck is too small and I have a lot of obligations to my family and other relatives. What is the best first thing to do in investing my hard-earned money. Please give me an advice on where to invest my money. A question asked by a reader of InvestmentTotal.com from San Diego, California, USA.

Awhile ago, I posted some article about investing in a “San Diego” based Facebook Group. I simply replied a basic guide in his email message, that’s why I published an article today about his question “How Do Employees Start Investing their Money?”.

How to Start Investing My Money Now as Employee?

Before investing, make sure you talk personally to a certified financial planner, after you talked to a CFP, you have to pay or lessen your debts, buy a health insurance and life insurance and then slowly building your emergency funds.

After you have done the tips above, make a financial goal by knowing your net worth first. Simply compute your assets minus the liabilities so you can get what your worth is. And then, ask yourself the following question;

When do I want to retire? After 20 or 30 years?
How much money should I have when I retire? You have to compute your target earning asset here.
Why am I investing? Why should I? Is it for retirement, for a new car, for your dream house, for my kid’s education funds?

Okay, now you know what your net worth is and the reasons why you need to invest your money. The step by step procedure to start investing your money are as follows;

Analyze your risk profile. Are you comfortable with high risk or low risk? Low risk investments are cash deposits and bonds. While high risk type of investments are stocks, mutual fund equity type, business ownership and real estate.

Decide where to invest your money. Since you are just an employee, you can do a “dollar cost averaging”, wherein you will invest your money regularly (example; per month).

Know Your Investment Horizon

Know your investment horizon, how many years should you stay investing. If you are willing to invest one hundred dollar per month within 30 years, your investment can turn into almost half million dollars. To know a sample computation about the possible return on your investment, read the future worth of $100 per month investment.

If you are decided to invest in stocks, find a stock broker firm, open an account with them, fund your account and start buying stock shares. You can do the stock market investing via online.

Tips & Warnings

If you are an employee, you can take advantage the automatic investing. Since you were from USA, you have to contribute in 401k or IRA. However, be careful to know it if 401k and IRA are the best investment vehicle to achieve your financial goal. Make sure your investments are higher than inflation rates.

To avoid common mistakes in investing money, it is advisable to attend investing seminars or financial literacy seminars in your local area. It is also advisable to seek professional help when investing your money. A Certified Financial Planner can help you analyze or assess your risk profile, and can teach or guide you on how to invest your money to achieve your financial goal.