The Millennial's Guide to Money - Part 5 Invest in Your 401K

Ready to finally get your money in order? Learn step-by-step how to gain control of your money and begin to build some wealth in this 6 part series!  Part 5 is all about investing in your 401k.

The Millennial's Guide to Money - Part 5 Invest in Your 401k

The Millennial's Guide to Money - Part 5 Invest in Your 401k

PART 1 - How to Organize Your Money
PART 2 - How to Automate Your Bills
PART 3 - Automate and Eliminate Your Debt
PART 4 - Creating a Budget That Works for You
PART 5 - Invest in Your 401k
PART 6 - 10 Awesome Personal Finance Tips for Millennial's From the Experts

The Millennial's Guide to Money - Part 5 Invest in Your 401K

Hope you are enjoying the series and gaining a ton of valuable information. Keep tackling those action steps. You’ll get there one step at a time. If you’re just jumping into this series, make sure you start at part 1. You can link there at the top or bottom of this article.

You’ve made it to the last step of this series! Congrats! You are making some huge progress in your personal finances!

Let's get started on the final step in the Millennial's Guide to Money!

If there is one thing I want you to remember from this lesson, it is this:

YOU NEED TO START INVESTING NOW AND I’ll TELL YOU WHY

I've been interested in investing for as long as I can remember. In my first experience I opened a savings account to earn interest. By the time I was an early teenager, I was buying Certificate of Deposits. As I progressed I bought my first mutual fund around 18. At some point in college I bought some stocks and even my first home. By my mid 20's I got into the whole real estate investing scene and I still continue to invest to this day.

A couple events in my life really triggered my interest in investing. I remember sitting down with my grandfather who was the CEO of a credit union and he was telling me that if I started early and managed to get $10,000 invested by my early 20's it could easily turn into over a million dollars by the time I was ready to retire. That really resonated with me. Once I heard that I absolutely wanted to do it.

Many years later, I was probably a senior in high school and I attended a party at this amazing house overlooking a river in the woods. It was an absolutely stunning property. I asked my friend how does the guy who owns this house afford it. He said, he's a stock investor. At that point I said to myself, I have to learn more about stocks and make it a huge part of my future.

So, here I am many years later, 33 years old. I'm still investing and well on track to hit the million dollar milestone in the future.

Unfortunately, many other millennials are not so fortunate. The 2008 'Great Recession' destroyed the hope of so many millennials. It made getting out of their parents house harder. It made finding a decent paying job harder. Worst of all it made them scared of investing. Many millennials don't save. Many even avoid the stock market at all cost. It's very unfortunate.

During the 2008 'Great Recession' I was heavily invested in the stock market and you know what? I survived. I not only quickly recovered but I've enjoyed huge gains since then and they are still growing to this day.

Here is a fact. If you began investing $10,000 a year with a 7% return (which is very reasonable) by the time you leave college at 22 you will earn $4.7 million when you retire. Even if you're getting a late start you can still be a millionaire. In fact, even if you were 40 years old and did the same you would still reach $1 million by the time you retire.

Now I realize saving $10,000 per year may be out of the reach of many, but that just shows how powerful investing can be.

Start investing $100 per year, then $1,000, and eventually you’ll get there. Trust me. It’s worth it.

Hopefully that is inspiring enough to get you interested in starting.. You may be ready to go, but have no idea where to start. No problem, here's how you get started:

BONUS: DOWNLOAD THE THE MILLENNIAL’S GUIDE TO MONEY: ACTION STEPS CHECKLIST!

The Millennial's Guide to Money - Action Steps Checklist

The Millennial's Guide to Money - Action Steps Checklist

This step by step checklist will give you what you need to take the next step in your own life. Put it on your wall, on your desk, basically anywhere you’ll see it daily. This will help you follow along and keep your steps in your mind daily, so you don’t forget about your goal.

 

Step 5 - Begin Investing 10% in a 401K

If you work for a company, you most likely have access to a company sponsored 401k. This is an easy and automated ticket to begin investing, make sure you are taking advantage of it.

Start by investing 10% of your salary into your 401K.

Make sure you are contributing enough to receive your company match. If your company will match your deposits up to 3% as long as you are depositing 6%, make sure you are contributing enough to get that match. If you’re not sure how your company 401k works, talk to your HR rep.

Some companies will even add profit sharing to help grow your 401K even faster. If yours does this, make sure you are doing what you need to get this as well.

Now you have to pick what you are going to invest that money in.

Ideally your company will allow you to invest in a selection of funds. The absolute best option to invest your funds into is an ETF index fund.

Index funds allow you to invest in the overall stock market and have much lower fees than other funds. A S&P 500 Index fund for example, will move with the stock market which has provided solid returns over history.

It’s one of the most diversified investment options you have while providing solid gains over time (proven by history). On top of that, it has some of the lowest investment fee’s you’ll find.

It’s a win, win, win.

Lastly, keep an eye on your investments and enjoy watching your money grow, while you sit back and let your money work for you. If you haven’t already downloaded Mint from an earlier post in this series, I highly suggest you try it out at www.mint.com.

Mint - www.mint.com

Mint - www.mint.com

Add your 401k account and watch your money grow from anywhere, all on your phone.

Action Steps:

  • Contribute enough to your 401k to get your company match

  • Contribute at least 10% of your income

  • Invest in low fee S&P 500 ETF’s

  • Sign up for a financial tracking app to keep an eye on your 401k balance

Congratulations! You did it!

It's not over yet though. Don't stop working on your finances. It's a life long journey to build wealth and financial freedom. Never stop caring about your finances.

PART 1 - How to Organize Your Money
PART 2 - How to Automate Your Bills
PART 3 - Automate and Eliminate Your Debt
PART 4 - Creating a Budget That Works for You
PART 5 - Invest in Your 401k
PART 6 - 10 Awesome Personal Finance Tips for Millennial's From the Experts

- David Shepherd - Creator of Let's Automate Your Life