What’s better than getting to keep the money you work to earn? Turning what you earn into more money without working harder or longer. To me, this sounds like magic, something left up to people in fancy suits with degrees in Finance, or the beginning of a movie about counting cards in Vegas. How is someone like me, who just graduated college and laughs at the thought of “investing money” because all I have is a very expensive piece of paper that left me with lots of debt before I even have the chance to make any money to invest, supposed to start having this conversation? It doesn’t seem like something to start thinking about until I’ve found my career and get myself settled and out of the hole I’ve grown so accustomed to. The truth is that looking at personal finances is not something reserved just for the middle-aged successful business woman (or man) and that it is something we should all be thinking about as soon as possible. Even us, the hilariously broke millennials who have no idea why people are talking about investing money into stocks and real estate when we are just trying to land jobs to pay off our loans. It is very important that we educate ourselves on ways to get the biggest bang for our buck, no matter how tiny that buck may be. Not only could we pay off our loans quicker than we would if we don’t invest our money wisely, but we can responsibly set ourselves up financially for our futures. Whether that be to move away, buy a home, have kids, adopt 27 dogs (what I plan on doing), go get more degrees, build a business, plan for retirement… Whatever it may be, it matters to us and we can educate ourselves on how to achieve these things as easily and quickly as possible. Here are some things to consider when thinking about personal finance and ways to start investing your money without much risk involved:
Mutual Funds are one of the safest and easiest ways to invest your money. Essentially, a mutual fund is a pool of money collected from a bunch of different investors to create a professionally managed portfolio that diversifies the money into different holdings like bonds, stocks, and other “securities.” This allows for small investors, like you and me, to put their money into a wide range of sectors in the market to create diversity, lower risk, and affordability. These things are great because they’re managed by a money manager whose actual job is to turn our capital into much larger gains. Liquidity is also another advantage in that you can pull your money out at any time you please. Each shareholder in the portfolio takes part in the gain and loss of the fund.
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REAL ESTATE INVESTMENT TRUSTS
Real Estate Investment Trusts, otherwise and more commonly known as REITs, are like mutual funds in that it provides investors, both big and small, the opportunity to own a share in real estate. There are a few different kinds of REITs- equity, mortgage, and hybrid. Equity meaning you can have ownership in actual property like apartment complexes or office buildings and create revenue through leasing or renting the property. Mortgage REITS allows you to invest in mortgages (obviously). You can purchase mortgages, own a mortgage, and loan money for a mortgage. The profits are generated by the interest margins created by the loans. The third kind, hybrid, is a combination of both equity and mortgage. REITs trade in major exchanges like stocks and offer investors liquid stake in real estate. This is a low-risk way to invest your money and they offer high dividend yields.
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CERTIFICATE OF DEPOSIT (CD)
These are set up like a savings account and is one of the safest ways to save and invest your money. You put a certain amount of money into this account that holds it for a fixed period of time, like 6 months or 5 years, and the bank that sells you the CD pays the interest while your money sits in the account. These are essentially a time deposit and you cannot take your money out of this account until the fixed redeemable date has come. It is guaranteed money because you will get everything you put into this account back, plus the interest paid to you by the bank, so you make money without doing anything. The length of time and interest rates are determined ahead of time so that you know exactly what you are getting into. You can decide how long you’d like to invest your money, but the longer the CD term, the higher the interest rate, and the more money you make. There is zero liquidity in this kind of investment, so thankfully there is a wide range of CD’s that allows for investing lower amounts of money for a shorter term with lower interest if not being able to touch your money for a fixed amount of time doesn’t sit well with you. We all put money away into savings accounts anyways, why not put money into one that makes money while it sits there?
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These are just a few examples to think about. The Resources for Residents and Communities offers classes all the time that they encourage everyone comes to that teaches people about things like this and more. Way more. The Homebuyer Education Class and the Home Purchase Renovation Loan Class are great resources to tap into when trying to educate yourself on ways to get the most out of your money. January 28th and February 25th are some upcoming opportunities to get involved. Click here to register.
Another great resource is The Mortgage Reports. They offer tons of information for first-time home buyers. You can go here to learn about types of mortgages and loans, learn the lingo and steps to take when thinking about purchasing a home, and even get a mortgage rate so you know what you’re getting into. Educating yourself ensures that you will be confident when taking a major step like buying a home.