You can improve your financial future with the proper planning, and you don’t have to be wealthy to do it. It’s a myth that only the ultra-rich invest. No matter what your yearly salary is, you can invest to create more wealth.
But the question remains, how much of your income should you invest? There isn’t one right answer to this question; it will vary from person to person and income to income.
Don’t let that intimidate you. Even if you’re a new investor, you can get into investing and wealth planning. Here is a quick guide for investing your income.
Consider Your Financial Goals
What do you want to do with the money from investing? Are you going to use it to retire, buy property, or invest more? Maybe you want to put it into a trust for your children or help pay for their education.
What you want to use the money for can help guide how you invest. When you know your financial goals, you’ll know how much you want to save up. This can tell you how much to invest, how aggressive to be, and even what to invest in.
There are plenty of ways to invest; you just need to find the right one for you. Consulting a financial advisor can help you through this process, giving you the financial models to use to reach your goals. Learn about advanced financial modeling.
How Much of Your Income Should You Invest?
So how much of your income should you invest exactly? A standard investment strategy is investing between 10% and 15% of your income. Set aside that percentage of money each month by putting it into an investment account.
However, if that’s a steep chunk out of your budget, you can start with a lower percentage. Consider 1% to 5% to start, and as you build wealth, you can slowly set aside more from month to month or after a few months.
Setting aside a larger percentage of money can initially be difficult and can put you in a pinch in the short term. But, after a few years, you will have built a substantial amount of wealth.
Keep an Emergency Fund
Even if you’re not investing, an emergency savings account is a smart financial tip. Set aside money in a savings account that can be used in case of a car breaking down, unexpected medical bills, or a similar emergency situation.
This little nest egg of money will prevent you from having to pull money from your investments. This will help protect all of your smart investments for the future.
Create Long-Term Wealth
No matter what your current income is, you can improve it by creating long-term wealth through investment. But how much of your income should you invest? Ultimately, you should invest however much will help increase your wealth but also allow you to remain as financially comfortable as possible.
You may also want to consult a financial advisor to help you better understand what investments you’re making and how they’re getting you closer to your financial goals. Whether you’re a beginner or have some investments under your belt, you can use your income to create long-term wealth.
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