Beginner Guide For People Completely New To Investing

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Are you ready to start saving for your retirement but have no clue where to start? Are you intimidated and have a hard time understanding investor “jargon”? If so, join the club! 

I’ve been soaking as much knowledge as possible from popular investors like Warren Buffet, John C. Bogle, and many others. One year ago, investing actually made me mad! I was like, why is it so dang hard to invest for my retirement? Shouldn’t this be easy?

What I’ve learned in the past year is you do not need to be a *pro*, but you do need to have some basic knowledge to make the right decisions for you. 

We’re going over the most important things you need to know as a new investor. None of these resources or tips are complicated. These are for true beginners.

I also highly recommend checking out the course: How To Build Wealth by Investing In Index Funds. This course is for beginner investors who want to learn how to build wealth by investing. I bought this course with my own money and 100% recommend it to any beginner investor.

Before we get started, make sure to sign up for my free resource library and get access to exclusive printables all about saving money and building wealth, meal planning, and more.

No matter when you’re reading this, the best time to start investing was yesterday. The second best time is now. We cannot rely on social security to help us and even if it is around when we retire, it most likely won’t be nearly enough to live off of. 

What happens if I don’t invest any money?

Many people don’t think about investing because they think it’s risky, assume their kids will take care of them, or believe social security will be enough for them to live off of.

Storing cash in a bank savings account simply isn’t enough. When you factor in inflation over the next few decades, your money will lose value and you’ll actually be losing money. 

Great news is even when the stock market crashes, you’ll still have a great return over the course of your investing journey. If you’re a young investor, you can weather the highs and lows of the market. 

This article here shows the average stock market returns over time.

How much do I need for retirement?

The best place to start your investing journey is figuring out how much you will approximately need. This is the fun part, seriously!

There are several retirement calculators online, but my favorite is Nerd Wallet’s retirement calculator. It’s simple and straight forward. 

All you do is enter your age, pre-tax income, and what your current savings are. You should also add how much money you save each month. Next, it’s optional to add how much your monthly retirement spending will be, when you want to retire, and your life expectancy. 

Fidelity’s rule of thumb is to save 10x your income by 67 years old (typical retirement age). 

What should I save each month? 

Once you enter in your numbers in the retirement calculator, you can determine roughly how much you should save each month. Most people recommend saving 10% of your take-home salary.

Example 1:

Annual Income after tax: $40,000

You spend 90% of your salary and invest 10% from ages 25-65 in an index fund in a Roth IRA.

At 65, you’ll have tax free: $2,125,593. 

(Example from Instagram @personalfinanceclub

Example 2: 

Invest $50 per week or $200 per month in a low-cost index fund from 25-65

Average total after 40 years: $1.3 million

(Example from Instagram (bossgirlmillionare)

How can I get started saving for my retirement?

The easiest way to start saving for retirement is to contribute to an employer-sponsored 401(k) plan. Most companies offer a company match (which we’ll talk about later, but it’s essentially “free money”).

If you’re an entrepreneur and run a small business, you have various options, including an Individual 401(k), SEP IRA, and Simple IRA. 

What are the different retirement plans?

Before we really get started, let’s talk about the different types of retirement plans. There are many, but we’ll be going over the most popular. If you want a list of different retirement plans, check out the IRS website here.

Some of the main retirement plans to choose from are a traditional 401(k), IRA, Roth IRA, Roth 401(k), Simple IRA, and SEP IRA. Each retirement plan has different rules on how much you can contribute, annual income limit and when you can take withdrawals without penalties. The most common retirement plans: Traditional 401(k), Roth 401(k), Traditional IRA, and Roth IRA. 

Traditional 401(k)

Contributions: Made with pre-tax dollars

Income limits: No income limit to participate

Maximum contribution in 2020: $19,500

Roth 401(k)

Contributions: Made with after-tax dollars from paycheck

Income limits: No income limit to participate 

Maximum contribution in 2020: $19,500

Traditional IRA

Contributions: Made on pre-tax dollars

Income limits: No income limit

Maximum contribution in 2020: $6,000

Roth IRA

Contributions: Made with after-tax dollars

Income limits: Under $139,000 singles, $206,000 married couples in 2020

Maximum contribution in 2020: $6,000

Here are the BEST pieces of advice & tips for investors

  • Focus on the long-term when investing your money.
  • Time in the market is more important than timing the market.
  • Keep it boring and simple and stick with index funds instead of individual stocks.
  • Set up automatic transfers into your investment accounts so you don’t even have to think about it.
  • Lower your monthly expenses by creating a budget or by being more conscious of your spending. Spend your money in a way that makes you happy, while saving, instead of trying to keep up with the Joneses.
  • Many employers offer matching of your 401(k) contributions. Example: Your employer offers a 100% match on all of your contributions each year, up to a maximum of 5%. If you earn $100,000 a year, the max amount your employer can contribute each year is $5,000. If you contribute $5,000, your money is matched. If you contribute nothing, your employer matches nothing. Not taking your employer’s match is essentially leaving free money on the table. When applying for jobs, this is something to really consider. “Does the job offer a 401(k) match?”

How to contribute more to your retirement accounts

I often hear a lot of people say they haven’t started saving for retirement because they live paycheck to paycheck.

If this is the case for you, you can do a few things:

How do I balance a happy medium between living life and also saving for retirement?

I received this question on my Instagram the other day and I’m glad I did. It’s easy for people in the personal finance community to compare each other and constantly think about saving more and more money. I’ve even seen many people get judged for spending money on certain things (spas, nicer cars, brand name clothing, etc.). It’s your money and you should spend it on things that are important to you. It shouldn’t be a race to see who can live the cheapest. 

When it comes down to it, personal finance is personal. What are some things that you really enjoy and want to spend money on? Maybe it’s going to a fancy restaurant once a month, investing in high-quality clothing items, or buying organic produce and investing in your health.

You can balance both saving money and spending money on things you enjoy. Maybe that means you’ll have to work another year or two in order to spend on the things you want to now. Maybe that means you need a new job so you can start making more money. Or maybe it means you need to work on your money mindset and develop a healthy relationship with money. 

Investing books you should read (that aren’t boring!):

I’m listing the 3 most helpful books that are for beginner investors. These books aren’t hard to read nor stuffy, and I actually found them to be fun reads.

All of these books can be found at your local library, Barnes and Noble, or Amazon. I personally recommend purchasing at least one investing books to keep on hand, so you can create tabs in your book (AKA dog ears) and go back to the book when you need it. 

Related: Blooom Review: 401(k) Retirement Plan + Free Analysis

“What’s your #1 tip for someone new to investing and saving for retirement?”

The #1 tip I would give to someone new to investing is to set up auto-contributions. An auto contribution is when money is taken from your bank account and automatically invested on the schedule you choose. For example, you can set it up so on the first of every month $500 is taken from your checking account and invested in an index fund with your brokerage. Imagine if in the year 1980 you spent an hour setting up an auto contribution of $250/month in an S&P 500 index fund and never looked at or touched it or any other investment ever again. At the end of 2019, your investment would be worth $1,740,527. – Jeremy from Personal Finance Club and make sure to check out his incredibly helpful Instagram at @personalfinanceclub
Jeremy is the creator of the course: How To Build Wealth by Investing In Index Funds. This course is for beginner investors who want to learn how to build wealth by investing. This course makes investing so incredibly easy to understand. You learn how to do everything step-by-step including: how to open an account, how much to invest, and how to choose an index fund. I bought this course with my own money and 100% recommend it to any beginner investor.

My investing journey

Since I run my own business, I decided to open an Individual 401(k) with Vanguard. I also opened a Roth IRA and Traditional IRA. I chose index funds for my accounts that have incredibly low fees. 

For fun, I use Robinhood and invest VERY small amounts in individual stocks. You can get a free stock here when you sign up for Robinhood.

What you should do now

Now that you have more knowledge of investing, it’s time to get started.

I recommend creating a budget to figure out how much you can save each month for retirement OR *paying yourself first* which means setting up auto contributions from your paycheck straight to your retirement account. Your work can most likely set this up for you. 

Set up automatic payments to go into your 401(k) and do your best to meet your employer’s company match to your 401(k), if they have one. A Roth IRA may be ideal for you as well, which you can open at places like Vanguard, Betterment, or Wealthfront.

If you run a small business like me, you have many options. I decided to create a small business account with Vanguard because of how many good reviews I’ve read from family, friends, and people I look up to in the personal finance niche. I spread the 401(k) $19,500 maximum contributing amount across 24 paychecks (I’m an S-Corp and get paid twice a month through Gusto). Since Roth IRA’s are after-tax, I contribute to my Roth IRA ($6,000) over the course of 12 months from my personal bank account. 

Quick Vanguard Review

My Individual 401(k) is with Vanguard. Vanguard is definitely keeping it old school with the user interface and design of the website. It’s very bare bones, which many people like. I, not so much. It gets the job done, but Betterment wins in this department. More on this later.

I love Vanguard because my fees are low and customer service is always SO helpful. When I first started getting into investing, everyone and their mother recommended Vanguard. So, obviously I was sold. 

Quick Betterment Review

My Roth IRA and Traditional IRA are with Betterment. So is my emergency fund! I didn’t even know it was possible to get so excited and motivated to invest, but Betterment does exactly that. It’s seriously built for millennials. 

When you open the app, your net worth immediately pops up (which I love to see). It’s almost impossible to over contribute to your retirement accounts in Betterment because under retirement accounts, it tells you how much you have remaining to contribute. Betterment also has technology that automates tax saving strategies like asset-allocation and tax loss harvesting. 

Betterment requires no minimum balance and has an annual fee of just .25 per year on your balance or $25 per year for every $10,000 invested. 

Betterment will manage $5,000 of your investment balance free for a year after you sign up and make your first deposit here.

Final Note

If you just read this and you’re like, “Wtf, I’m even more confused than before” – it’s okay! When anyone first starts learning about investing, it can sound overwhelming and so many different numbers and rules are thrown away. 

This is why I recommend digesting some investing knowledge on a regular basis, either by a book, investing influencers on IG, etc.

You can do it! Start saving for retirement and feel great about your financial future.

Don’t forget to sign up for the free resource library and get exclusive access to free printables & planners related to saving and making money, meal planning, and more! 

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