Join us Tuesday Oct. 15th for Fast Start Basics

This class is based on what I teach each year at Baylor University.
Hundreds of students have used this class to gain confidence with their money.

We'll cover:

• Level-Setting: Where are you with money and where do you want to be?
• Bank Accounts: Where does your money go?
• Budgets: A plan you'll actually stick to
• Debt: How to manage and get out of it
• Investing: Bring clarity to a confusing world

​Read more and Register Here​

Ready to stop thinking about investing and finally start?
Today we’ll talk about when it makes sense to start and how to make your first investment.

Let’s start with one of my favorite quotes on investing:

You can’t understand investing without understanding the power of time and compounding. Compound Interest is the growth of your money’s growth.

Think of a baby tree: It starts as just one branch and maybe a few leaves. Over time, that branch grows other branches.

Then, those branches grow branches leaving dozens of individual branches growing and expanding on their own.

That’s what compounding does to money.

You invest $1, it grows by $1. Now both dollars are growing together. Over the years, this process snowballs - the money you've made starts making money.

Sorta make sense?

In the first few years, you won’t notice compounding’s power. The growth is honestly pretty small.

Because of that you may be tempted to stop investing. You may even be tempted to throw your money at something promising to get you rich quickly.

Avoid. This. Temptation.

Say you make $50k and save 10% of your money each year. After 10 years, you’ve put in $50,000.

Saving that much money in itself is impressive. But remember, investing aims to grow your money. What potential growth did we get?

For this, we'll assume annual growth of 7%. Market returns each year vary widely, but over the decades they have averaged out to around 7% annually after inflation.

After 10 years, that 7% compound interest will have turned that $50,000 into $72,005. ~$22k in gains - that’s pretty solid!

But what about after 20 years?

You’ve now put in $100,000 of your own money.

Assuming 7% annual growth, your $100k has grown into $216,710.

Notice your money grew faster in years 10-20: Compounding is starting to take effect.

What about after 30 years? You’ve put in $150,000 of your own dollars (again, no small feat).

Your investments have now grown to a total of $507,516. That is some serious, inflation-adjusted cash.

Again, notice how steep the green line gets the longer you go; that’s compounding at work.

This scenario was assuming investing 10% of a $50,000 annual salary.

Want to test using your own numbers? Check out Nerd Wallet’s Compound Interest Calculator.

So, back to our first question: When is the best time to start investing?

As soon as possible.

The second question is how do you start?

As someone who’s navigated investing as a non-professional, I know how overwhelming it can be. Here’s how I got started:

1. Reach out to a brokerage firm. These are companies you’ve likely heard of: Fidelity, Schwab, Vanguard, etc.
   • My wife and I use Fidelity since our 401(k)s through work are with Fidelity.
2. Most firms have great customer service. You can use email, chat, or a phone call. Either way, tell them you want to get started investing in low-fee investments. Ask them about index funds. Ask them about the S&P 500 (more on these next time).
   • Spend time here to understand what they are recommending.
   • Ask the “dumb questions”. Make sure you understand what you are investing in and what the fees are for them.
   • For most of you reading this, your total fees for everything related to investing should be between .01% and .2% ← Extremely low
3. Ask them to get you set up with automatic investments. This way, money will pull from your checking account each month and you won’t have to think about it.

That’s it! It may take you an hour or so on the phone with them: Take the hour!

Need a final nudge?

Remember how our 30 year scenario grows to $507k?

How many other opportunities will you get in life for an extra $39k?

So, get to it. Schedule that call with a brokerage today and next week you’ll have officially made your first investment!

Over the next few weeks, I’ll talk through:

1. How to decide how much of your money to invest
2. Various types of investments (this will be the most “technical” but will give you a good baseline of information to give you confidence in finance-speak)
3. How to minimize taxes when investing

Some final notes on investing for now:

Professionals spend their entire careers on investing. I simply won’t be able to cover all of the nuances and personal aspects on this newsletter. Especially as a hobbyist, not an investment professional.

That’s why I push you to consult a professional. Investing is dependent on you and your personal preferences. All investments are subject to loss. Investment professionals give you a clear understanding before you invest. All of the information I provided aims to be educational in nature and should not be taken as financial or investment advice.