How to Get Started with Investing: Practical Tips and Real-Life Stories

Hey there!

You’ve probably heard the saying, “money attracts money,” and it’s true. Those who already have money tend to see their portfolios grow faster. In this article, I’ll explain why that happens and share some tips on how you can make money from your investments.

If you've joined any investment discussions, you might have heard that once you pass a certain threshold, better opportunities come your way and your portfolio grows faster. This is why wealthy people often get even richer.

But why is the first $100,000 the hardest to achieve? Let's explore two main reasons:


Lack of Experience and Knowledge

When you first start working and enter the financial world, making money is more challenging. You need to educate yourself about your job, personal skills, money management, and basic finance. Typically, you start your career with a low salary and increase your earnings as you gain experience.

Power of Capital Scale

The larger your capital, the greater your absolute returns. Understanding the power of capital scale is crucial. So, how can you overcome the first $100,000 hurdle?

Here are a few tips:

Start Early: The earlier you start saving and investing, the more you benefit from the power of compound returns. Compound returns mean you earn not only on your initial capital but also on the earnings added to your capital. For example, if you invest in the S&P 500 index with an annual return of 7%, it will take you about 6 years to reach the first $100,000. However, reaching the second $100,000 will take only 4 years, and the third $100,000 even less than 3 years.

Save First: Before you start investing, save at least three times your monthly expenses. Keep this money in a liquid investment that you can easily convert to cash when needed. Once you have this safety net, you can start investing.

Reduce Expenses: By reducing your expenses, you can increase the amount you allocate for investments. Small savings can accumulate into significant amounts over time. Increase Your Income: Enhance your professional and personal skills to increase your earnings. You can ask for a raise, take on side jobs, or create additional income by adding value and solving problems for others.

Choose the Right Investment Tools: Select investments that provide the best annual returns. With a bit of research, you can find the right investment tools without spending too much time.

Now, let me share a couple of real-life stories to illustrate these points:

Jane's Journey to Financial Freedom

Jane was my old neigbour prior to move to San Diego. She started her career as a graphic designer, earning a modest salary. She realized early on that if she wanted to build wealth, she needed to invest. Jane began by saving three months’ worth of living expenses. Once she had this safety net, she started investing in low-cost index funds.

Jane also worked on improving her skills, taking online courses to become a better designer and eventually started freelancing on the side. Her increased income allowed her to invest more each month. Over the years, her investments grew significantly thanks to the power of compound returns. Today, Jane enjoys financial freedom and continues to invest wisely, in California CA.

Mike's Path to Early Retirement

I met Mike during my journey in Phidelphia for a symposium. After work, when we drop in a cozy bar there, he told me his story about his investment story. He was an engineer who wanted to retire early. He knew that to achieve this goal, he needed to be smart with his money.

Mike has focused on reducing his expenses by living frugally and saving a large portion of his salary. He invested in a mix of stocks and real estate, carefully choosing investments that offered good returns.

Mike also has looked for ways to increase his income. He has taken consulting jobs and started a blog about engineering, which eventually became a source of passive income. With his disciplined saving and investing strategy, Mike was able to retire at the age of 45.

Conclusion

As I described above, the first thing to get achivement for your succesfull investment adventure, focus on increasing your earnings, then invest in your professional and personal development, save by reducing expenses, and start investing as early as possible. Don’t underestimate the power of compound returns; even small amounts can grow into substantial wealth over time.

Remember, the key is to start early, stay disciplined, and continuously look for ways to improve your financial situation.

Happy investing!