- Read as much as possible about investing free online and at your local library, and when you have mastered the basics, keep abreast of current financial trends. When you begin investing, make sure you stay informed about any news items that may affect your assets.
- Before investing a dime, make sure you have an adequate emergency fund, usually three to six months worth of living expenses. You do not want to have to liquidate part or all of your investment savings due to an unexpected medical or other emergency. Make sure your savings are highly liquid and secure, even if your rate of return is low; you do not want fees and/or speculation to erode the value of these funds.
- Put aside as much money as you can in your employer's 401k account or its equivalent. If you cannot contribute the maximum amount allowable, then start by contributing enough to be eligible to receive your employer's match -- free money many employers provide their employees in exchange for saving a certain percentage of their income toward retirement. Then contribute some or all of your future raises to your retirement account gradually until you reach the maximum contribution limit.
Depending on your employer and your income, you may be eligible for a Roth 401k, which allows you to withdraw your savings at retirement tax-free, as long as you pay taxes on your contributions now. This may make sense if you expect to be in a higher tax-bracket upon retirement, but you should only opt for this after careful consideration of your current and projected future income, expenses and tax liabilities.
Once you are maxing out your 401k or equivalent, stash funds in either a traditional or a Roth IRA, again depending on your current and projected future income, expenses and tax liabilities. - Invest as much as you can into tax-advantaged, high-yield investments. These could be stocks, bonds, exchange-traded funds, mutual funds, real estate investment trusts, residential real estate, commercial real estate or even your own business. You want to maximize your revenue-generating potential while you can, so diversify between taxable and tax-deferred accounts because you will not actually know what your future tax bracket will be until you retire.
- It is always a good idea to develop streams of residual income. You do not have to be a songwriter to collect royalties: Setting up a profitable blog, writing a successful e-book or selling crafts online can help cover unanticipated retirement expenses, and, if you start early enough, can become a substantial portion of your retirement income.
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