{"id":171011,"date":"2014-03-18T04:00:44","date_gmt":"2014-03-18T11:00:44","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/?p=171011"},"modified":"2023-09-28T15:21:01","modified_gmt":"2023-09-28T21:21:01","slug":"how-to-get-started-investing","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/how-to-get-started-investing\/","title":{"rendered":"How to get started investing"},"content":{"rendered":"
Confession time: Despite a financial and business education more comprehensive than most, I never invested. I grew up poor and just couldn’t wait for my first “serious” job and those big bucks. It was so bad, I decided to drop out of college in my senior year. “None of this ivory-tower crap is going to make me any more money,” I told everyone who would listen. Fortunately, both of them were able to talk me off the ledge. One of them was my future wife, bless her little gizzard.<\/p>\n
After graduation, my illusions were shattered: There are no high-paying jobs in a recession for someone with just a bachelor’s degree. There are hardly any jobs at all. Carol Burnett came up with the formula: Comedy = Tragedy + Time. That explains why I’ve been able to entertain so many guests after dinner with the now-humorous details of my early career. Bottom line: It took several years to set up a household on entry-level wages. My big break came when, in the final year of my MBA, I landed a job that tripled my income. (No matter what all the critics say, no single degree makes you as much money as an MBA.)<\/p>\n
Finally, we were rolling in it. The top restaurateurs in town knew us by name. You would think that someone with such a solid education (in accounting and finance, no less) would realize the time had come to start investing. You would be wrong. We had accumulated us some Joneses along the way, up with which we had to keep, and we did some serious “keeping” for the next few years.<\/p>\n
Of course, we told ourselves we were “investing.” (All big spenders<\/a> do that.) You could call that spectacular wooded plot in the Cape (Town, not Cod) for our next dream custom-built home an investment. We did. You can call anything you spend money on “an investment” — nice cars (they will be collectible one day, you know), good wines (more valuable when aged), jewelry, and any number of other wanna-haves — investments, one and all.<\/p>\n Deluding yourself that what you’re doing is smart is not hard. Wise readers know where that journey ended: Our debt tripped us up in our 40s, and we got wiped out in yet another recession.<\/p>\n That’s when I got mad.<\/p>\n And that’s when I got smart. I discovered the more you make, the more you spend. And it’s true what they say: Money can’t buy you happiness. Lack of money, though, doesn’t bring you barrels of fun, either. I haven’t heard too many people say that, because it sounds materialistic; but take it from someone who’s lived on both sides of that railroad track. There is more peace in the house when the finances are in order.<\/p>\n This post was started in response to a question from a reader, who asked: How do you get started investing? Penny stocks, maybe? In response, I wrote a nice, sterile post with the five-point plan to get started. But after reading it over, I did the electronic equivalent of crumpling it up and tossing it in the wastepaper basket.<\/p>\n Why? Because I’ve heard that all before and it never got me to start when I should have started. Why, then, would it help the non-investing reader?<\/p>\n Everybody has heard the message that you’ve got to invest<\/a>. And if I have a dollar for every “get-started” plan written, I’d be one of the sharks on “Shark Tank.” And yet, it is equally well documented how Americans are headed for retirement disaster because they don’t invest.<\/p>\n Why not?<\/p>\n Because none of those articles, lectures, books, posts, speeches, or admonitions addresses the starting point: passion<\/strong><\/em>.<\/p>\n Until you get mad, you’re not going to change. That’s true for any lifestyle improvement: losing weight, quitting smoking, getting fit\u2026 or investing.<\/p>\n So, Step One is making a passionate decision.<\/strong> It doesn’t matter if it’s fear, anger, humiliation, or even (dare I say it?) greed. Investing is a long, long grind. Along the way, you’ll face thousands of temptations to derail you, and very few to keep you on track. In the face of that barrage, you’ll only stay the course<\/a> if you have a steely resolve, and we human beings are wired in such a way that pretty much the only way to maintain that steely resolve is to have it fueled with a long-term fire in your belly. Nothing but that passion will neutralize the onslaught of temptations coming at you day after day\u2026 after day.<\/p>\n Once you’ve made that resolve, pretty much anything you invest in can work. My father-in-law only invested in a savings account. You could argue with him all you want (“C’mon, Dad, you can double your earnings with any other investment!”) but a savings account was the only investment he felt passionate about. He made it work. With passion, you can make anything work.<\/strong><\/p>\n I started (late, to be sure) with a savings account<\/a>. I wanted to open a brokerage account, but back then you needed a couple thousand or some huge number like that to open a new account. Along the way, I discovered a nice thing about a savings account: there’s no minimum to start, or to deposit. When we got a $15 refund for something, I could deposit that into the savings account and nobody would frown. It became a game: how high can we make it grow this month? Saving became a foreground activity, not a background activity as so many people think it ought to be.<\/p>\n And that, I think, is Step Two: Make your investing an intentional, “foreground” part of your life<\/strong>. Facing my mid-40s with nothing forced me to admit that my lifestyle was proof that I’m not a natural saver\/investor. And so, just like a recovering alcoholic, I need to be very deliberate in staying off the spending wagon<\/a>. No more fancy cars, no more fancy nothing\u2026 and no more Joneses.<\/p>\n I began measuring my worth in things other people couldn’t see.<\/p>\n We were surprised to see how quickly our savings grew when it became an endeavor of passion. So we signed up for 401(k) plans where we worked, and went for the maximum deductions, matching or no matching.<\/p>\n<\/span>1. Passion<\/span><\/h2>\n
<\/span>2. Foreground<\/span><\/h2>\n