When you are new to investing all the terminology can seem overwhelming. Just looking at stocks alone you immediately encounter terms like domestic stock, international stock, large cap, growth stock, and emerging markets. It is enough for you to run screaming. Please don’t do that, taking the time to learn what it all means can be easier than you think plus you do not want to miss out on the benefits of investing just because the word domestic stock scared you.
As with learning a foreign language you learn one word at a time, you do not expect to be immediately fluent at the start of learning a new language. Instead you start by learning the basics such as “hello” and “good-bye” and slowly learn more words and eventually complete sentences. Eventually after time and practice you learn how to speak another language.
As with a language you start with the basics in money. What are the basics in money? You first need to start by making sure that you are living on less than you make. Why is this first step to learning about investing? When your budget is not in balance and you have the stress of living paycheck to paycheck your brain is not able to process and learn the investing information at an optimal level. The short science version is that when you are constantly stressed the chemicals in your brain are not balanced and causes the cells in your hippocampus to become either injured or destroyed. The hippocampus is the area of your brain needed for learning and memory. So when you are focused and stressed about meeting your basic needs it is much harder for you to process information on investing. Not to mention it will stress you out by adding one more thing to the list of things you must accomplish with your money. So start with a budget or written spending plan if that sounds better, and start to figure out how to ensure you are not negative every month and that you have the room to begin to save money.
Once you have balanced your budget it is time to move on to learning the next step to investing fluency. The next step involves you building a strong support base to operate off of, that base is an emergency fund. When you don’t have an emergency fund you run the risk of either running up debt when life happens or having to tap into your investments. Which defeats the purpose of investing, would you plant a garden and then pull it out just when the first green stem is coming through the dirt? When investing you want to be able to leave the money alone for at least five years. Having the emergency fund creates the space between life and your investments. You should work on establishing an emergency fund of three to six months of expenses, and put it in a plain money market or savings. The point of an emergency fund is that it is handy and you don’t have to worry about getting out at the wrong time.
Congratulations you have now reached a point where you know the basics and can focus on creating complete sentences in learning your new language. This is where in money we come back to you running and screaming in order to escape the terminology of investing. So how do you begin to learn this process? Begin to read books and magazines; attend seminars, read articles on the internet anything you can get your hands on that teaches about investing. At first it might not make sense or you may feel like you are making no progress, but as with a foreign language it will eventually all start to come together. Set aside 15 minutes a day to read about money if that is as much as you can do now, eventually as it becomes easier you can read longer or try those seminars. As with learning a language if you don’t work on it you will not learn it.
Are you an overachiever and want extra credit? As with learning a language you make more progress by experiencing the process. When studying Italian, you make more progress by heading to Italy and interacting with locals. With investing you learn more by actually doing. So start small, take $25 or $50 a month and start investing. What you learn along the way will supplement what you are reading and before you know it you are fluent in investing!
Now it is time to take a deep breath, pull together all your money information and start working on that budget, before you know it you will be on to investing.
Andrea Travillian
http://www.smartstepomaha.com
Making Money Fun and Easy Allowing You to Fulfill Your Dreams.
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