You've just put on those brand new butter bars and someone is actually paying you some real money. You work hard for that money and now you want to make it work for you.
Great, you’ve made the decision to invest. This is a choice only some adults only make when they’re twice your age. You might think your youth is a drawback. It can actually be quite the opposite. If you invest now in your early 20s compared to your mid-30s or early 40s, your money has longer to become valuable.
Of course, investments can be complicated dealings. Here’s what you should know before diving in head first.
Have an Understanding of How Investing Works
It’s your money you’re going to invest, so you should know where it’s going, how it’s used, and how it may increase over time.
If you’re pursuing this on your own, it’s time to learn. Yes, the world of investments may be complicated, but take the time to absorb everything and ensure this is something you want to get involved with for a while. The greatest principal to learn at this stage is the value of compound earnings/interest. Compound earnings are the earnings that you earn on your prior earnings. One crucial component of compound earnings is that the more time your investments have, the greater the compounding effect can be.
So, the younger you are when you start investing, the better your chances that your investments will grow to a larger amount.
Set Aside Some of Your Military Pay for Investments
This comes as no surprise, but you need to have the cash handy to put towards investments. It doesn’t always have to be a huge sum, but still, it shouldn’t set you back financially to invest. Pay yourself first, by directing funds towards the Thrift Savings Plan (TSP). If you wait to invest until after you've paid your bills, the money will be gone. Try to invest, in the TSP or other investment accounts, 10% or more of your income. You should still be able to pay for your expenses, like rent, food, school supplies, student loans, and the like after making your investments.
Don’t Expect Results Overnight
If you’re investing because you think it’s some sort of way to make millions overnight, you’re going to be sorely disappointed. Yes, some people do invest in a new company and eventually make a lot because that company takes off. That said, this is not an overnight process. It can sometimes take a decade or longer before you see a real payoff on your investments. You’re going to have to be patient.
Be Ready for Ups and Downs
Markets go up and markets go down. But over long periods of time, which you have sense you're starting early, they almost always go up. But before you start to invest, make sure you have the discipline to stick to the plan. I'm thinking you probably do as you're a military officer, but we all have limits. Figure out what yours is.
When the markets do go down, instead of being deterred from investing again, stick to the plan. Think about it. Everything just went "on sale".
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.