I both see this question online a lot and get it in person when I talk about personal finance. When to start investing? There are lots of different opinions out there on the interwebs, and this article is my try at answering this question.
Something Something Tree Something Planting Something
There is this great saying that goes around the internet quite a lot. It has been credited as a “Chinese proverb”, although I’m not sure if that’s actually true. If you know, let me know in the comments below!
The proverb or saying goes like this:
The best time to plant a tree is 20 years ago. The second-best time is now.
The proverb itself is pretty clear in its meaning I think. If you want something to grow, it takes time. Growing trees takes a lot of time, so you should start as soon as possible.
If you had planted a tree 20 years ago, it would have been a great tree today. If you haven’t planted that tree 20 years ago, please don’t wait any longer and do it today. Don’t waste any more time.
The same is true for investing. Investing takes time. There is no magic formula, there is no get
But I Have Student Loans or a Mortgage
It doesn’t matter. Remember, this is my personal opinion, not necessarily true for your situation. But I strongly believe it doesn’t matter that you’re not debt free if you are asking the question of when to start investing.
Here’s a little secret: did you know you can pay off debt and invest at the same time? I mean, personally, I’m in camp investing, instead of paying off debt. But that is because my debts together have a weighted average interest rate of 1.1% and I have no problem making payments from a cashflow perspective.
I’ve written before about the pay off debt or invest dilemma. For most people that have their finances in check, there should be no reason to postpone investing. So, when to start investing can usually be answered with right now.
Depending on how deep in debt you are, what interest rates you’re paying, and how your cash flow situation looks like you can simply allocate part of your investable cash each month to paying down loans and another part to investing.
Only if you’re really deep into debt, I would say to allocate everything to debt payments. Otherwise, just start investing today!
But I’m Not a Master Stock Picker
Neither am I! Picking stocks or timing the market are skills that only very small numbers of people are truly good at. That is assuming these are true skills and not prolonged times of getting lucky.
Picking stocks is not necessary to start investing. In our financial independence community, the most widely used strategy is index investing. I do this by buying two different ETFs at DeGiro if you click the link to this article I will explain exactly how I do that: Ultimate Guide to DeGiro ETF Investing.
But I Don’t Know How All of This Works
That’s why you’re reading Fire The Boss and other financial blogs! If you want to know more about my investment strategy, you just click the link and enjoy the read. Don’t forget to pour yourself a nice cup of coffee or tea, because it can be a long read!
If you decided to start investing in index funds and ETFs, you can read more on those as well. When you’re ready to start investing, make sure to use my DeGiro affiliate links below.
So read and listen to learn, but don’t wait! Don’t fall into the trap of analysis paralysis, but start today. We’ve all learnt by taking small baby steps, one at a time. You will be there as well. When you’re there, you look back at your younger self and wonder why you didn’t start to invest earlier.