5 Simple Steps to Start Saving and Investing Right Now!

You're earning an income but don't know where to start when it comes to saving and investing, don’t worry, we've got you covered! 

Whether you're just starting out or you've been working for a while, here are 5 super simple steps you can take right now to get started on your saving and investing journey.

1. Create a Budget

Before you can start saving and investing, you need to know how much money you have and where it's going.  The best way to get started is by creating a budget. You don’t need to be a financial wizard to do this, you can use a notebook or excel spreadsheet to help you track your income and expenses.

1. Start by listing all your income sources, this is any money you’re earning on a regular basis. For most people this will be your salary, but you may also earn consistent money on a regular basis from side jobs.

2. Minus your fixed expenses. These are non-negotiables such as rent, utilities, car payments and credit card payments.

3. Then list your variable expenses, such as groceries, entertainment, and clothing.

4. Once you have a clear picture of your finances, you can adjust your spending to fit your saving and investing goals.

 2. Set Saving Goals

Figure out what you're saving and investing for.  To keep it simple, we are focusing on two important goals.

Short term: you want to set up a savings account to build an emergency fund. On average, setting a goal of saving at least 3-6 months of living expenses will give you a good financial buffer if your ability to earn is unexpectedly affected. 

Long term: you want to focus on investing. You don’t need a lot of money to begin, but by putting away a small amount on a consistent basis in a low risk fund your money will grow as the value of your investment increases over time.

 3. Automate Your Savings

One of the easiest ways to save money is to automate your savings.  Set up automatic transfers from your checking account to your savings/ investment account, or a direct deposit from your paycheck to your savings/ investment account. This way, you won't have to think about saving, and you'll be less likely to spend the money elsewhere.

4. Start Saving

Now you have defined your saving goal, commit to saving a certain amount consistently each month. 

Remember, this is money that you don’t want to touch unless absolutely necessary, so your goal should be to open a high interest savings account. 

Which account: Marcus by Goldman is one of my top picks.

Why: Its currently paying an APY of 4.3% on your savings* / There’s no minimum deposit requirement / There’s no monthly maintenance fee / Its online, so you can easily access it any time of day / The account opening process simple / The interface is easy to use. 

One thing to keep in mind: To move money in and out of your account, you need to link the Marcus Saving account to your existing checking account. It can take 2-3 business days for your money to move between accounts, but I like this feature because it means I can’t quickly move money out of my account for a spontaneous purchase.  So, it helps me stay disciplined.

*According to the Federal Deposit Insurance Corporation (FDIC), the national average savings account rate is 0.42% as of July 17, 2023.

 5. Start Investing

You’ve automated your savings in an online, high yield savings account. Now you’re ready to start building your longer-term wealth strategy. This is where investing comes in.

Although people often use the words interchangeably, investing is not the same as trading. Trading involves buying and selling stocks to make frequent profits by taking advantage of short term rises and falls of market prices. Whereas Investing is buying and holding financial assets to generate income over the long term.

Trading involves significant risk and without proper education, should not be your focus as a beginner investor.

You want to start your investing journey by focusing on low-risk, low-cost investment products such as Exchange Traded Funds, or Target Dated Funds. 

You need to open an investment account. This is easy to do online with a reputable brokerage firm. 

Which: TD Ameritrade, Charles Schwab, Fidelity; Hargreaves Lansdown (UK)

Why: They all offer a broad range of investment products. The account opening process is very straightforward and easy to follow. TD Ameritrade has amazing tools and learning resources for beginners. For our readers in the UK, Hargreaves Lansdown is a great platform for beginners. Both Charles Schwab and Fidelity offer the possibility to buy fractional shares. So, if you can’t afford to buy a full share, you can slowly build up by buying small fractions of certain shares at prices you can afford.

One thing to keep in mind: as part of the account opening process, you will be required to provide your social security number, your income information and other personal details so they can validate your identity for fraud protection. They may even require additional information which could add a few days to the account opening process, but once complete, you’re ready to go!

Conclusion:

Making your money work for you is not complicated, but it does take some effort and discipline.  Start by setting clear goals and creating a budget. Then, take small steps to automate your savings and educate yourself. It's never too late to begin this journey, and the earlier you start, the more time your money has to grow and help you achieve your financial goals. Every dollar you save and invest today is an investment in a better tomorrow!

This article is written based on personal experience. It is not financial advice, I am not a financial advisor, and everyone’s personal circumstances differ. You should always seek professional advice from a qualified fee-only, fiduciary financial professional.

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