Before continuing, I’d like to state that I am by no means a professional financial advisor and I am not telling you how to use your money. I am simply passing on knowledge I have gained through my own research with hopes that it may encourage others to do the same. With that being said, let’s get started with investing. My blog posts on investing will cover many modes but it is up to you to find your own niche that works best for you!
In previous posts, we covered saving and eliminating debt so that we can get to the point we’re at now, which is putting your money to work for you. There are seemingly endless ways to invest money and see returns, the most common ones being stocks, bonds, and real estate. We will cover these more a little later on, because before we jump into those we are going to discuss a few options which give you instant ROI with little to no risk. These options are tax deferred retirement accounts, and although it’s hard to put money away for decades, you will thank yourself when the time comes.
Through hours of reading personal finance blogs and watching video breakdowns, there is a general consensus in the world of finance that Roth IRA’s and 401k’s are the best investments somebody can make. Many experts will advise you not to invest in anything until both are “maxed out”. This is because there are tax benefits associated with either account. With a Roth IRA, the money you put in is taxed when deposited as opposed to when you withdraw it. The 401k account allows for tax deferral until you are eligible to withdraw. Another huge benefit of a 401k is the fact that many employers will match a certain amount every year, which is practically a 100% return on your money. For the reasons above, the smartest investment you can start with is opening a tax deferred retirement account.
Throughout my learning experience, discovering the benefits of retirement accounts has been the biggest surprise for me thus far. I encourage you to do your own due diligence to figure out what works best for you, but I strongly recommend looking into Roth IRA’s and 401k’s. We have made it past the basic’s of personal finance and are getting into the heavier stuff, so stay tuned for more investment options which may just lead you to early retirement.