Personal Financial Planning

Investment strategies for the ultimate beginner 2023

Before creating digital content, people always say to choose a niche. Content creators say selecting a specific niche can help to identify and narrow your target audience. I have always found this to be one of the most challenging parts of starting to create content. I have many interests, and narrowing down one topic I am most passionate about is difficult, mainly because I am still exploring my passions. I have a lot of interests that I am still investing my time in learning about. I have interests in cooking, yoga, hiking, camping, and personal development, to name a few. I will likely be writing about each of these topics at some point. Over the past few years, I have developed a genuine interest in personal finance and the path toward financial freedom and independence.

“Someone is sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffet

From a young age, I was well aware of money's importance. Not to say that money is the most important thing, but that it is necessary and of great value. My mother struggled at times financially while raising me as a single parent. There were some economically challenging times, but my mother always did her best to provide for me. I remember a few times when groceries were scarce. For better or for worse, these memories of financial hardship impacted my prioritization of money and made me start working as soon as I graduated high school.

I was living in South Korea when Covid initially broke out. The school I was teaching at was shut down for a month. No one was out and about, and I could only stay in my apartment. I had nowhere to go, and everyone was advised to stay home. I had a lot of time on my hands, so I became fascinated with financial YouTube videos. I remember watching many YouTube videos on financial investing. Shortly after, I read the book Rich Dad Poor Dad by Robert Kyosaki. It was the first financial literacy book I had ever read, and it was very insightful. One of the main lessons that stuck with me was that rich people have assets while poor people have liabilities, and the rich make money work for them rather than working for money. This is a great foundational financial literacy book, and I highly recommend it.

The concept of trading time for money became even more paramount for me. When I returned from South Korea in 2020 and started working for the first time as a full-time worker in the U.S., I quickly realized how hard it was to earn enough money to cover all my expenses while saving and trying to get ahead financially.

Starting in 2020, I began dabbling in investing. I started out investing in individual stocks using the Robinhood app. Investing in individual stocks was a learning experience, and I made some mistakes and losses along the way. I have learned more about more intelligent ways to invest and save money. I learned that true wealth is built over the long term, and I am not looking for any get-rich-quick schemes. I continue to read and improve my knowledge of personal finance and investing because my strategy is for long-term financial freedom and independence.

Why personal financial freedom may be for you:

• You don’t want to work until you’re 65 years old.

• You want to be financially secure and stable.

• You no longer want to sit in traffic commuting to work.

• You don’t want to work for someone else and answer to a supervisor.

• You don’t want to be confined to a traditional 9-5.

• You want to spend more time outdoors and in nature.

• You want to retire early to pursue other hobbies or passion projects that you are more passionate about (this doesn’t mean you have to quit working, but maybe you want to be ‘retired-ish’ early).

• You want to have more freedom of time.

• You want to travel the world.

Where to begin?

These are my tips for beginners starting to take hold of their finances and explore financial literacy. I was once new and lost, but here is my strategy for setting yourself up financially in 2023.

• Emergency Fund: Ensure you have an emergency savings fund in case of unexpected financial challenges, such as getting laid off from work or unexpected expenses. It is recommended to calculate your total monthly expenses. Then save 3-6 months of your total monthly expenses so that you have enough to live on if you lose your job, so you cover all your monthly costs while unemployed.

• High-Yield Savings Account: It is beneficial to save your money in a high-yield savings account. Even though the interest earned is not huge, it is better than your money sitting in a bank account and not making anything while inflation rises.

  • Compare fees & minimum balances.

  • Research interest rates (APR - annual percentage rate) at various banks.

  • Research customer service reviews & experiences others have had in the past.

  • SoFi bank has one of the highest APY at 3.75% with no account fees. And Marcus by Goldman Sachs also has an APY at 3.30%. (This is not sponsored, I happen to bank with both of these financial institutes because I was searching for a bank with high-yield interest and no fees.)

• 401K/ 403B: If your employer offers a 401K or 401B retirement plan, determine how much they are willing to match. Most companies will match your contributions to your 401K retirement account up to a certain percentage. The advantage of a 401K is the tax-deferred contribution by your employer.

• Open a Brokerage Account: Investing in ETFs and Mutual Funds is easier than ever today with self-directed brokerage accounts and robo-advisors to assist you if needed. Many well-known and reliable brokerage firms today exist, such as Fidelity, Vanguard, TD Ameritrade, and many more. All of these brokerage accounts have zero account minimums and zero fees. Nerdwallet and Investopedia are my go-to’s for research and gaining financial clarity. Here is a page comparing brokerage firms.

  • I use Fidelity because my first 401K was initiated there when I worked at Starbucks. You can have multiple brokerage firms, but I prefer keeping my investments in one place to avoid having too many accounts and logins.

  • Once you have picked the best brokerage account for your financial needs, select ‘Open An Account.’

    

• Roth IRA: Roth IRA is a retirement account that offers the ability to invest while growing your investments tax-free and allowing for tax-free withdrawals during retirement. You can withdraw your contributions anytime, for any reason, without taxes or penalties.

  • Eligible contribution of $6500 per year.

  • Max out your Roth IRA.

• ETFs and Index Funds: Through the ROTH IRA, buy low-cost ETF Index Funds that track the S&P 500. An index fund is a mutual fund or exchange-traded fund (ETF)with a portfolio of hundreds of companies designed to match and follow the market index, such as the S&P 500. Index funds are considered basket stocks because they hold hundreds of top-performing companies, so you get a slice of each company—for example, Apple, Microsoft, Google, Tesla, etc.

  • The average return of the stock market is between 7%-10% annually.

  • Choose an index fund with a low expense ratio.

  • ETFs & Mutual Funds Examples: VOO, VTI, FXAIX, VTSAX, FSKAX

  • You can even set up automatic deposits and investments

• Diversify Your Portfolio: Invest in U.S. index funds, international index funds, and bonds to balance your portfolio. The Younger you are, the more risk you can take. As you get older, you will want to invest in more bonds.

• Dividends: Make sure you turn ON dividend reinvestment. Dividends are the redistribution of profits by the company to its shareholders.

• Let Your Portfolio Compound: Do not pull out your money until retirement.

This was a brief overview of my financial investment strategy. These strategies can help you on your road toward financial freedom. Always research and investigate your best options based on your financial circumstances.

I understand how hard it can be to save money, let alone to invest, when living paycheck to paycheck. But take it day by day. Allow small changes to become healthy financial habits. You will find yourself reaching your goals gradually, and it will become easier over time. If you have debt, the best way to pay down debt is to pay more than the minimum due each month and pay the debt balance with the highest interest rate first. Once you are debt-free, start building your emergency savings. And lastly, live below your means. Do not spend more than your income, and budget wisely.

This is financial education not advising.

Thank you so much for being here. If you have any financial tips, I would love for you to share them.

Financial Tool Recommendations:

Compound Interest CalculatorThis is how I calculate the compound interest from investing in mutual funds and index funds that track the S&P 500. This helps me to predict how my investments will grow and compound over time. This has helped me to figure out my early retirement number.

Favorite Youtube Channels for Financial Learning: Graham Stephen, Tae Kim - Finacial Tortoise, Humphrey Yang, Our Rich Journey. These YouTubers teach financial literacy, how to prepare for retirement, and investing. They also provide a wealth of information for growing your money in long-term investments and making financially wise decisions based on the changing market economy.

Budget Tracking : I use Intuit Mint, because it helps me keep track of my spending. It helps me to budget and also keep track of subscriptions. I do not pay any fees or subscriptions, and the app's free version works well.

Instagram Accounts about Personal Finance: @personalfinanceclub, @planingmyfi, @your.richbff, @delyannethemoneycoach, @rachel_talksmoney. These financial coaches post great content in bite-size pieces to learn about investing and making wise financial decisions.