A Financially Naive Beginning
It was 2006 when I came to the US as a young student from India, with some scholarship money and a lot of financial loans that my father helped me with. It was the first time I had my own credit card with a 300 US dollar credit limit which seemed a lot at that time. It wasn't until 2007 (yes, a year before the big recession of my generation) that I stepped into the stock market.
I still remember that I used Computershare to buy stocks of some large US companies. It was all new to me and I had never tried any kind of investing before and I had the luxury of having no firm financial goals. Luckily there was a message ingrained in my head that I'm investing for a long haul. I joined a training program where I learned what investing meant and how P/E ratio can help me with that. It was the basics that I had to begin with rather than a notion that investing means day-trading or a get-rich-fast scheme. I'm no expert but I would definitely say with confidence that I am deeply interested in this topic.
A Modern Financial Planning World
Since then a lot has changed in the world of financial planning and investing. We have apps like Mint or Personal Capital that brings all your accounts into a single dashboard with information and tools that even a financially naive person can use to their advantage. I personally like Personal Capital, just because of the look and feel of the dashboard.
Step 1 - Begin with Robo
There are now robo-advisors that are available, for example, Betterment and Wealthfront, that automate your investing, whether it's for a retirement or for specific financial goals. All of these invest in Vanguard Index funds and allocate your assets based on popular models like Swensen Model (or Yale Model). It's a good way to put your money to work outside of 401k, IRAs etc. You can pick your risk profile and amount to invest on a frequent basis, and you're done - that's it. The reason I kept this as the first step is that you should not delay investing while you figure your way around the world of financial planning.
Step 2 - Please do understand your 401k
Another step to financial growth that I missed early on is understanding the money I'm already investing in my company sponsored 401k. And if you're lucky enough then your company matches completely or partially what you invest in 401k - that is free money towards your retirement. One of the things I realized a little bit later was asset allocation. I tried for a while service of Blooom that optimizes your 401k. However, I ended up switching to Vanguard where my 401k actually resides due to lower fee structure.
Read, read, read
And as a young investor, which you are if you at least have a 401k, you've to read about the field. Ramit Sethi's I Will Teach You to be Rich is a good starting point. It's a simple enough book for beginners to understand the aspects of your finances and it is perhaps the easiest step you can take to take control. And if you're the millennial generation like me, you're probably still suffering from the aftereffects of 2008. And then you hear on news, things like, only 62% of American households have less than 1000 US dollars in their savings account - which just scares the crap out of me. So taking control of something requires understanding where the reigns are.
Once you're comfortable with the knowledge of your finances you can delve deeper into other topics which should have started to fascinate you by now. I personally am reading any John Bogle books I can find. Read, ruminate and implement, if possible. Of course, there are tons of other financial advice floating around, from your parents to the neighbor. But ultimately the decision should be based on facts and a good enough understanding, not someone else's whims. So do read!
What else can you do?
It was 2006 when I came to the US as a young student from India, with some scholarship money and a lot of financial loans that my father helped me with. It was the first time I had my own credit card with a 300 US dollar credit limit which seemed a lot at that time. It wasn't until 2007 (yes, a year before the big recession of my generation) that I stepped into the stock market.
I still remember that I used Computershare to buy stocks of some large US companies. It was all new to me and I had never tried any kind of investing before and I had the luxury of having no firm financial goals. Luckily there was a message ingrained in my head that I'm investing for a long haul. I joined a training program where I learned what investing meant and how P/E ratio can help me with that. It was the basics that I had to begin with rather than a notion that investing means day-trading or a get-rich-fast scheme. I'm no expert but I would definitely say with confidence that I am deeply interested in this topic.
A Modern Financial Planning World
Since then a lot has changed in the world of financial planning and investing. We have apps like Mint or Personal Capital that brings all your accounts into a single dashboard with information and tools that even a financially naive person can use to their advantage. I personally like Personal Capital, just because of the look and feel of the dashboard.
Step 1 - Begin with Robo
There are now robo-advisors that are available, for example, Betterment and Wealthfront, that automate your investing, whether it's for a retirement or for specific financial goals. All of these invest in Vanguard Index funds and allocate your assets based on popular models like Swensen Model (or Yale Model). It's a good way to put your money to work outside of 401k, IRAs etc. You can pick your risk profile and amount to invest on a frequent basis, and you're done - that's it. The reason I kept this as the first step is that you should not delay investing while you figure your way around the world of financial planning.
Step 2 - Please do understand your 401k
Another step to financial growth that I missed early on is understanding the money I'm already investing in my company sponsored 401k. And if you're lucky enough then your company matches completely or partially what you invest in 401k - that is free money towards your retirement. One of the things I realized a little bit later was asset allocation. I tried for a while service of Blooom that optimizes your 401k. However, I ended up switching to Vanguard where my 401k actually resides due to lower fee structure.
Read, read, read
And as a young investor, which you are if you at least have a 401k, you've to read about the field. Ramit Sethi's I Will Teach You to be Rich is a good starting point. It's a simple enough book for beginners to understand the aspects of your finances and it is perhaps the easiest step you can take to take control. And if you're the millennial generation like me, you're probably still suffering from the aftereffects of 2008. And then you hear on news, things like, only 62% of American households have less than 1000 US dollars in their savings account - which just scares the crap out of me. So taking control of something requires understanding where the reigns are.
Once you're comfortable with the knowledge of your finances you can delve deeper into other topics which should have started to fascinate you by now. I personally am reading any John Bogle books I can find. Read, ruminate and implement, if possible. Of course, there are tons of other financial advice floating around, from your parents to the neighbor. But ultimately the decision should be based on facts and a good enough understanding, not someone else's whims. So do read!
What else can you do?
- Umm, my last advice is beginning as early as you can, in whatever method(s) you decide would be useful for your financial goals.
- Don't go for short-term wins, believe me, there are millions trying to chase these goals, some even successfully. However, early on risk aversion is better than losing everything chasing speculation.
- And focus on financial planning, as that's the topic that will change your life; ETFs, Index Funds, and all other jargons going around are good only if you understand your financial condition. And if you see a problem there, work on it.
- And keep at it, don't lose heart if you see short-term drops, but come up with a plan and keep taking baby steps.
“Don't look for the needle in the haystack. Just buy the haystack!” - John C Bogle
I've only picked few financial apps that I have tried myself. There is a wealth of information on the internet on the comparison of various tools, applications, models etc. So do your research, and as I said - read, read and read. And here is my disclaimer!
#financialplanning #investmentapps
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