Investing 101: Investing Basics For Beginners - Part 2 (Beginners investing tips)

Before we go over the specifics of what you should consider investing in, be it stocks, bonds, or your friends start up — let’s first go over the basics of how you would go about investing.

Investing is what usually happens when at the end of the month, after all your bills are paid, you’ve got a few Rands left over to put towards your future. The question you probably have at this point is how are you supposed to find those elusive extra Rands to save? Here’s how.

Avoid lifestyle creep In most cases, you’ll earn more in your thirties than you did in your twenties, and even more than that in your forties. The key to saving is to do your absolute best to avoid what’s called “lifestyle creep”. Some of you may not have heard of it before but I am sure you have experienced it or observed it, let me explain what it is.

Lifestyle creep means that as you make more money, what once seemed like luxuries become necessities. What used to be a once in a while activity like eating at the most expensive restaurants becomes an every week activity. Instead, you should do your very best to live the same way you’ve always lived. Then put away the extra money you’re making from your raises rather than increase your spending.

Start investing — even a little at a time

Once you’ve got savings, you’ll absolutely want to invest. Inflation will almost always be more than the interest rate that you’ll be able to get on a savings account. You’ll be effectively be saving and losing money at the same time. This is why you should start investing as soon as you can.

Investing is not just for the Mostepe's of the world. If you are finding it tough to put away some investing money each month, try adjusting your budget.

Investing small amounts of money is a great habit to get into and your money will add up over time. If you're looking for more easy ways to invest with little money, here they are.

How can I Invest with Little Money?

1. Invest small amounts at a time

2. Set up small, monthly transfers from your current account

3. Use a low-cost investing service

4. Brew your own coffee, invest your Starbucks money

5. Immediately invest any tax returns

6. Invest any raises instead of altering your lifestyle

7. Ask relatives for investing money, rather than other gifts

Know what you're investing for How you invest depends on what exactly you're investing for. You might be investing money to help your 14 year old daughter with her upcoming university fees. You might want to invest money to live off when you retire in 30 years or so. The time horizons on each of these investments are very different. Because you'll need access to some of them sooner than others. Those with shorter horizons should invest more conservatively. Those investing money they don't need for a long time can choose riskier investments.

Understand the risk you are taking

Before deciding where to invest, you’ll need to first assess your personal risk tolerance. This is a fancy way of saying how much of your investment you can really afford to lose. If you need money for next month’s rent, you have a very low-risk tolerance.

If your life wouldn’t be materially affected in any way, if rather than investing money, you set fire to it, your risk tolerance is through the roof. Risk tolerance is often dictated by your so-called “time horizon” (how long you investing for).

Savings investment accounts are typically seen as low risk. They are appropriate for holding your emergency fund, rainy day money, or this month rent. Investing is much more suited to money you don't need in the short term, for example your retirement savings, or a fund for your child's university education.

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