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Budgeting Investing

Are you ready to start investing?

This post is sponsored by Robinhood.

Elephant in the room

Before we get started, let’s talk about the giant elephant in the room. That elephant is the misconception that investing is only for the wealthy and that it should be left to the professionals because it’s so difficult.

That couldn’t be further from the truth, but I’ll be honest, I had that thought process for so many years. Or the thought that it’s something that I’ll do in my late 30s when I have enough money to invest because you need a minimum of like $10,000 to start. 

Also not true. 

With investing apps like Robinhood, you can get started investing today. You don’t need to be a professional, and you can get started with as little as $1. 

Fractional shares are a great way to start building your portfolio with as little as $1. A fractional share is a portion of an equity stock or ETF allowing you to buy into the company without having to buy the whole stock. 

Fractional shares are great for beginners or people who don’t have a lot in their budget for investing because you could buy into a company at any price. Where before, you had to save up to buy the whole share, which for some companies like Amazon are over $2,000. 

Paid off high-interest debt

Should you pay off debt or invest? I get this question all the time. Before you start throwing all of your extra money into the stock market, it is wise to pay off all of your high-interest debt.

Do you have car loans, student loans, personal loans, payday loans, or credit card debt?  I recommend any debt that has an interest rate of 7% or higher. 

Historically, the market has returns of 7% over the long term, so any debts with an interest rate higher than 7% are going to cost you money, especially credit card debt. 

As always, we can not guarantee that the market will get a 7% return, but the 7% interest rate rule is my personal go-to. 

Create a budget

Paying off all of your high-interest debt and jumping into the world of investing can be so scary but also extremely exciting. 

I remember when I first downloaded Robinhood and put in a couple of hundred dollars; I started to see some high returns, and it made me want to buy more and more stocks to see those graphs rise! 

As exciting as it is to want to dump all of your money into stocks, it’s important to first see how much money you have to work with and ensure that your bills are paid. 

If you don’t already have a budget, there are so many different types: you can use Excel like I do, a pen and paper budget, or even a budgeting app. I have my excel budget templates on SALE right now if you want to use the same budget that I do.

If you are struggling with what to put in your budget or how much to put in each category like groceries, eating out and gas, I recommend doing a Spending Analysis. What that will do is help you to break down all the categories for the last 3-6 months of bank statements. Of course, I have a video on How to do a Spending Analysis as well.

Writing down your bills is not a budget. Let me say that again for the people in the back, just writing down your bills is NOT a budget.

You need to be tracking your income, all of your bills, AND all of your transactions. Finalizing your budget at the end of the month is the MOST important part of budgeting, in my opinion.

That is when you can take a step back, see how the month went, what you can change for the next month, and see how much money you have remaining or how much in the red you are.

Please don’t get discouraged if your first few months of budgeting don’t go as planned. Studies have shown that it takes about 3-6 months of budgeting to get the hang of it.

There will be times where your spouse goes WAY over their spending money or you have an unexpected dinner with friends or that you budgeted HALF as much for a category as you should’ve. Hopefully, the spending analysis will help with some of that.

After you’ve created your budget, you can now see how much money a month to put towards your portfolio and start getting those gains! 

Build an emergency fund 

Building a solid portfolio is important, but you can’t forget the other financial goals that will set you up for financial success. 

At a very minimum, I suggest having an emergency fund of one months’ worth of expenses, then slowly working up to 3-6 months’ worth, and keeping it in a high-yield savings account. (Watch this video here where I explain why $1,000 is not enough for an Emergency Fund). 

A great way to do this is in your budget is to set aside money for your investments and also a line item for your emergency fund. It is totally okay to work on more than one goal at a time! 

Having an emergency fund can be the difference between a small bump in your financial life or a complete financial disaster that puts you deeper in debt. An emergency fund ensures against life’s unexpected expenses.

Are you educated? 

I am all about hands-on learning. The best way for me to learn something new is to just start doing it and learn as I go. 

Apps like Robinhood are extremely intuitive and easy to learn as you go, but it’s also important to always be educating yourself on investing strategies and what not to do. 

Many people have the thought process that they will start to learn about investing when they are ready. NO! Start learning now! 

If you wait until you are ready to start investing it may cause you to procrastinate starting. If you are paying off those high-interest credit cards now, start learning and educating yourself so that when you are ready to start you are able to jump in head first!

Here are some resources to help you learn the basics of investing before you get started: 

• 5 Things To Do BEFORE You Start INVESTING

• Top 8 Investing Mistakes Every Beginner Should Avoid 

• Should You Pay Off Debt or Invest? 

• 5 Easy Steps to Overcome the Fear of Investing 

• Dividend Investing for Beginners 

• The Simple Path to Wealth by J L Collins

Click here to download the Robinhood app and get started investing today!

Fractional shares are illiquid outside the Robinhood platform and are not transferable. Not all investments available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, visit www.robinhood.com. Investing is risky. Robinhood Financial LLC

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