What are your personal financial goals for 2018?

Wherever you are in life, investing probably should be among these goals, since it’s the best way to build and secure a sustainable future for yourself.

But there are so many things to know. How can you find money for investing? And what should you invest in? After all, isn’t investing risky, and something that only the rich can afford to do?

In this article, I’ll help explain why you should start investing, how you can find the funds for it, and what exactly should you be putting your money in.

Why should you invest at all?

You might be thinking “Well, I have a career and a reliable source of income, why should I bother investing at all?”.

To understand why you should bother investing and creating streams of passive income for yourself, you have to think about the things that most people would rather not think about.

  • Job loss. Your job might seem stable and your employers might seem reliable right now. But are they really? Think about the 2008 crisis when millions of people all over the world lost their jobs through no fault of their own. What happens if (or rather when) there is another economic downturn? Then there’s outsourcing. What if your employers decide that you and your colleagues simply aren’t worth the paycheck and decide to hire rising talent in a country like India? Moreover, there’s the technology to worry about, because AI might soon take your place! It might sound silly, but it’s true! As Martin Ford points out in his book The Rise of Robots, robots are not only good at replacing people who are flipping burgers, they are also coming for the white collar jobs as well. Are you sure you are that irreplaceable? You need to be prepared for a case of job loss even if that kind of a situation seems very unlikely to happen. And the best way to prepare for it is to create a stream of income that is independent from your job!
  • Illness. You never know when an illness might render you unable to work. Sure, you might be young and healthy now, but who knows what the future might bring? How long would your savings last in an unfortunate situation like this? Probably not long enough. This is another reason why it’s so important to have a source of passive income that would continue coming in even in a case where you can’t work anymore.
  • Old age. In modern world the vast majority of us are pretty much guaranteed to live until we are really old. That time of your old age might still be decades away, but in reality, time flies, and you will be old before you know it. So how do you want your golden years to look like? We all imagine contently sitting by the fireplace and playing with our grandchildren. However, the reality for old people is often much more dire, because they have to take a huge cut in income once they retire. Are you ready to reduce your living standards in the final stage of your life? Most people aren’t and are shocked by the situation they find themselves in during their golden years. That’s yet another reason for investing and creating income streams that can supplement your pension once you retire.

I know. It’s very unpleasant to think about these things. But it’s better to think things through and be prepared for the worst case scenarios than to not have a care in the world and then be taken by surprise when things go wrong. And one of the best ways to prepare for things going wrong in life is having multiple sources of income (especially passive income).

Where to find money for investing?

Okay, so now you understand that you need to start investing, but that is easier said than done, isn’t it? Millennials are often made fun of for still living with their parents and working at Starbucks, but the reality is that we graduated right into the Great Recession, and are still recovering from that. And it’s not only the Millennials that are struggling. Apparently, one in four families in UK has less than 90 pounds in their savings account. So how can you find money for investing when you are already pinching pennies?

  • Figure out where your money is going at the moment. Do you know where your money is going? If you are like most people, you probably don’t. The solution to that is to start tracking all your expenses. And by all, I really do mean all, down to a 20p pack of chewing gum. That might seem excessive, but it’s the kind of discipline you need to get your finances in order. You can use Excel or various apps for this. However, I’d recommend going old school, and using just pen and paper. That way, the reality of your spending habits will really sink in, and you’ll be more likely to find some fat to trim.
  • Decide what you should be doing with your money instead. Once you know where your money is going at the moment, it’s time to decide where it should be going instead. Eric Ravenscraft, the author of How to Start Managing Your Money, For Those Who Never Learned Growing Up, recommends spending 50%-60% of your income on fixed costs (various bills), leaving 20%-35% for guilt-free spending, setting 5%-10% aside for savings, and another 10% for investment. These are good guidelines although I personally think that there should be less guilt-free spending and more saving and investing (for example, I think that every time you buy a coffee, you should also set aside the same amount for investing). It’s up for you to decide!
  • Automate everything that can be automated. Willpower is a limited resource so you can’t expect to do everything right through sheer willpower alone. In fact, the best thing you can do for your finances is to take as many decisions out of your hands as possible, and make it run on autopilot. So go to your bank and set up automatic payments for bills, savings, and investments.

With these three steps you’ll be able to regain control of your finances and you’ll find money to set aside for investing even if you are on a tight budget at the moment.

What should you invest in?

Once you are ready to invest, you might be overwhelmed by all the options out there, and get stuck in analysis paralysis. What exactly should you put your money into?

Here are five investment types that might be a good fit for you:

  • Investment account. This is the most basic investment option out there. You put the money in and then you eventually get it back with an interest. The return is usually 1%-2%. It’s a very safe option but it won’t make you rich.
  • P2P lending. Peer-to-peer lending is a financial practice where people who are looking for loans are matched with people who are willing to lend. With FastInvest you can start investing in P2P loans from as little as $1 (seriously). We also offer a Default guarantee and Buy Back guarantee which means that your exposure to risk is minimal.
  • Real estate. Real estate flipping is quite risky, but buying properties and renting them out is a great way to build up some long-term wealth. Just resist the temptation to over-leverage yourself!
  • Startups. Up until recently, startups were an investment opportunity that was only available for venture capital funds and the super-rich, but now with angel investing ordinary people can join the game as well. However, you have to keep in mind that startup investing is similar to playing a lottery. The odds of striking it rich with any one startup are very low.
  • Cryptocurrencies. In the year 2017 we have seen an astronomical rise of cryptocurrencies like Bitcoin and Ethereum. Since then, both have crashed, but they are still over $10,000 and over $1,000 respectively. What will 2018 bring for cryptocurrencies? There’s no way to know. However, cryptocurrency afficionados are enthusiastic, and predict even more growth. Some techies even think that Bitcoin will hit $1,000,000 in the next 5-10 years!

The most important thing you should know about investing, though, is that you should never invest money you are not willing to lose. The best way to think about the money you set aside for investing is as you’d think of money spent on lottery tickets. Sure, it is much more predictable than playing the lottery, but thinking that way will ensure that you never spend money you can’t afford to lose, especially on high-risk, high-reward investments like startups and cryptocurrencies.

Make investing your priority in 2018!

Your future rests solely on your shoulders - if you don’t take action and do things that matter, no one else will do them for you.

This applies to investing, too. You need to get serious about it and start taking action steps towards making it a reality. No one will build your financial future for you!