We have all heard the old phrase, “You won’t make a million dollars by saving a million dollars.” If this is true, then how are we supposed to get to a million dollars? This phrase is usually something people say when they are talking about investing money. According to investopedia.com, investing is, “The act of committing money or capital into an endeavor with the expectation of obtaining an additional income or profit.” In other words, you are giving a portion of your money to a company in attempt to get back more than you gave. How it works is simpler than it may first appear. When the company you have invested in makes money, you get a portion of that money. When the company you have invested in loses money, you lose money as well.
The thought of investing can sound difficult, grown up, and overwhelming. Here are the answers to some questions you might have…
When should I start investing?
When you start is ultimately up to you and your circumstances! Some people may be eager to begin investing sooner and others may choose to wait until they have graduated high school or college and have obtained a full time job. In theory, the sooner you begin investing, the more money you will have later in life.
How can I start investing?
There are many ways to invest. One way in which you can invest money would be through opening up a brokerage account and letting a bank or investment company do your investing. You could also choose to open a brokerage account and choose which companies you would like to invest in yourself. Another investment option would be to invest in your 401ks set up by employers, savings accounts, or creating a separate account of money to invest.
As a college student, there are some easier ways to set up brokerage accounts, for example Acorns or Robinhood apps, and invest without having to go through a bank or investment company. Acorns rounds your purchases on your debit card up to the next dollar and invests the spare change. Acorns is a great place to grow your money, because you are saving spare change and investing at the same time. Robinhood is an app that allows investors to buy and sell stocks without having to pay commission rates. This is also a good option for someone who is just starting out and wants to experiment.
Can I invest if I have debt?
It is important to remember that all debt is not equal. There is debt with higher interest rates and lower interest rates. There is short and there is long-term debt. Short-term debt is debt that has to be paid on within the year. Some examples of short-term debt include credit cards, short-term bank loans, etc. Short-term debt usually comes with higher interest rates. Long-term debt is debt that does not have to be paid for a year or more. Some examples of long-term debt include student loans, mortgages, car loans, etc. Long-term debt typically comes with lower interest rates. When making the decision to invest or pay off debt, just think about what makes the most sense. If you invest in a stock that pays an average of 5% per month and your credit card payment is collecting 15% interest per month, it would make the most sense to put your money into paying off your first debt so it does not increase.
How much should I invest?
The amount you invest should be based off your goals and your risk tolerance. Establishing your goals can help determine how much money you will need to build and you can base your investments off of that. Defining your risk tolerance can help you figure out how much you are comfortable investing. People who have a lower risk tolerance may not be as comfortable investing as much money in fear of losing it. People who have a higher risk tolerance may have a stronger desire to invest and essentially “risk” more. In theory, the more you invest, the greater the return.
What does the Bible say about investing?
We know that God encourages us to seek wise counsel and plan for the future. As with anything else, we should take these same approaches with investing. When investing, we can also look to invest in companies whose values align with our morals and values as Christians. Here are some verses to guide you.
Proverbs 21:5 “The plans of the diligent lead to profit as surely as haste leads to poverty.”
Proverbs 21:20 “The wise store up choice food and olive oil, but fools gulp theirs down.”
Proverbs 13:16 “A wise man thinks ahead; a fool doesn’t, and even brags about it!”
Proverbs 27:23 “Be diligent to know the state of your flocks, and attend to your herds.”
If you have any additional questions about investing or are seeking biblical financial accountability feel free to schedule a one-on-one coaching session with me by emailing me at [email protected]