When a young adult is ready to start investing, there are quite a few options. They may have great intentions of investing and saving for their future but have no idea where to start. It can be overwhelming to decide between the array of options and know what is best for each person. To make the decision a little easier, here are some of the best investment tips for young adults in 2020:
Investing In Real Estate
When you start looking into investing, one of the best investment tips for young adults is to look into real estate. You may already be considering a home purchase, here’s how that decision can be a great investment option for you.
A Home For Yourself
A great option for investing in real estate is to purchase your own home. This option is great for some people because while it’s a great investment opportunity, it’s also a goal for many to own their own home. Generally, it’s best to live by the rule “leave it better than you found it”. Even if you don’t plan on selling your home in the future, making upgrades while you live there means you’ll be prepared for if you do have to sell it. Something as basic as working with a residential roofing company to redo your roof can have a huge positive impact in the value of your home. The more work you put into it, the more you’ll be able to come out ahead in the end.
If you decide to build your own home, check out any new industrial construction companies in your area. Working with a construction company has many benefits as they already have connections to electricians, plumbers, and landscapers and may even be able to get you great deals on their work.
Flipping A Home
One of the most common options for investing in real estate is to purchase an older home with the intention to “flip it”. Flipping a home simply means purchasing an older home, renovating it, then reselling it to make a profit. Just like with your own home, working with a residential roofing company for roof replacement on an older home will yield a big increase in value on the home.
Some people even make a business out of flipping homes. Rather than doing minimal changes, they will give the house a complete facelift. This could include redoing the landscape around the home, repainting the exterior, or knocking down walls for a new interior layout. Even something like a new garage door installation can give the home a totally new look. Giving an old home a more modern look with accents like floor to ceiling windows or frameless glass doors will increase the value and bring in more potential buyers to see it when it’s ready.
Another real estate investment option is to become a landlord. So rather than selling the house you intended to flip, you could consider renting it out. This is one of the better investment tips for young adults because it can be a passive way to get income. For a while, the rent you receive will go towards paying off the home mortgage. If you’re able to charge a higher rent price, you may even be able to get some income each month on top of paying the mortgage, though there’s always a benefit to paying extra on your monthly payments. Once the mortgage is paid off, the rent can serve a secondary income. Investing in residential roofing is just one of the many ways that you can raise the price of your rent and make more of a profit.
Investing In Finances
When it comes to long-term financial planning, only 30% of Americans have goals that cover both investments and savings. As a young adult prepares to start investing there are a few important tips they should consider for the process.
Paying Down Debt
The first of any investment tips for young adults that should be considered is paying off debt, especially any loans with high-interest rates. Anything over 10% is considered high-interest and should be the main focus when a young adult wants to start investing.
Paying down debt can have immediate positive impacts for young adults. Less debt means fewer total bills to pay each month which equals more money left over to invest in other areas. As a young adult pays down their debt, their net worth increases. A higher net worth is generally a sign that someone is financially independent.
Common areas of high-interest debt are credit cards, student loans, and car payments. While student loans are generally viewed as an acceptable type of debt, rates can still be high and racking up interest at a quick rate. A young adult should focus not only on paying down these sources of debt but also refraining from acquiring any more. If more student loans are necessary, a young adult should first check all other options, such as possible grants and scholarships.
Preparing For Retirement
One of the main reasons people choose to invest is to assure financial support for the future. While retirement is far off in the eyes of a young adult, it’s never too early to start preparing, in fact, preparing for retirement is one of the most important investment tips for young adults.
Many employers offer 401(k) retirement plans. If you’re employed by a company that offers this, don’t pass it up. It’s a great chance to be proactively contributing to your retirement while earning an income. The money comes right out of your paycheck which can make the process easier as you don’t have to remember to transfer it yourself. Some companies will even match your savings to a certain percentage.
There are a few options to consider when it comes to your retirement savings. You invest in a 401(k) with pretax dollars, which lightens your tax burden at the end of the year. With a Roth 401(k) or an IRA, the income invested is after-tax, but when you withdraw from the funds it won’t be taxed. There are positives and negatives to each income, so make sure to do proper research before you decide on one.
When it comes to investing financially, there is a huge variety of options to choose from. That’s why the most important of the investment tips for young adults is to do your research before you commit to anything. To make that research process a little easier, here is a brief description of the most common investing options:
- Stocks: Having stock in a company means you have legal ownership in a portion of that business. Companies sell stock to raise money for their business. The two types of stock are common and preferred. A common stock gives you a portion that varies based on the success of the company. Preferred stock gives you a specific predetermined amount of money. Earning money from stocks is not something that happens quickly. The best advice for stocks is to be patient and prepared to hold on to them long-term if you want te max return on investment.
- Bonds: A bond is a contract between the purchaser and a company that states that the company can borrow money from the purchaser. The money is usually used to finance a project or refinance debt. You loan them money for a certain period of time, and once that time has run out the contract states that they will return your money plus interest. Bonds are a lower risk so they’re a great option for someone that is starting out with investing.
- Mutual Funds: A mutual fund is an investment fund where multiple parties pool their money to use on a variety of investments. The fund is generally professionally-managed by someone who can give tips and advice. This option allows someone who would not have enough money on their own to purchase big investments. You can earn money through dividends and interest on stocks and bonds purchased, through capital gain, or by selling your stock shares for a profit.
Remember that when it comes to investment tips for young adults, the most important thing is to do your research before making any choices. Investing can come with significant risks, so the more research you do, the better prepared you’ll be.
Investing In Yourself
One of the most important but most commonly forgotten investment tips for young adults is investing in yourself. While having different financial options is important, if you haven’t taken care of your own self, those other options don’t mean as much. Investing in both your physical and mental health is key to being in a good place to take full advantage of your life, including all of your investments.
Investing in your physical health is step number one when it comes to investment tips for young adults. One key way to maintain your health is to exercise regularly. The American Heart Association recommends that adults get at least 150 minutes (2.5 hours) of moderate-intensity aerobic exercise or 75 minutes (1.25 hours) of vigorous aerobic exercise per week. That’s only about 30 minutes of moderate exercise five days a week, or 15 minutes of vigorous exercise five days a week. There are plenty of great options for aerobic exercise, whether it’s running, cross-training, or even a long walk or hike. If you have a gym accessible, there are some great machinery options for aerobic work as well. Treadmills or ellipticals are a great option. Another option could be a stair climber, which gives both a great aerobic and muscle building workout in one.
Dietary health is also important when it comes to investing in your physical health. There are many different types of diets and health choices people make, including being vegetarian, vegan, going gluten-free, or dairy-free. While there are many health choices people make, there are specific dietary recommendations that all young adults should strive to meet. Some of the dietary recommendations from the American Heart Association include emphasizing these in your diet:
- A variety of fruits and vegetables
- Whole grains
- Nuts and legumes
- Skinless poultry and fish
- Limited saturated fat and trans fat
- Limited red meat
Make sure to always talk to your doctor before you make any serious changes to your diet.
Unfortunately, poor body image can have a huge impact on the mental health of a young adult. Low self-esteem, or a lack of confidence, can weigh a person down in so many ways. Low confidence makes it difficult for a young adult to believe in their capabilities and excel in life. Because of this, one of the best investment tips for young adults is to invest in their own self-confidence. Whether this is doing things to enhance their physical looks or to talk with a therapist to learn great ways to bolster their confidence, there are many options.
Some of the most common first steps for a young adult to take when it comes to physical appearance is to look into cosmetic dentistry. Many children and teens have braces or some form of teeth correction at some point, but 20% completely stop using those retainers as soon as two years after the removal of their braces, according to Science Daily. Cosmetic dentistry can help to not only correct anything misaligned teeth but also whiten and brighten teeth. If there are bigger issues than a simple alignment or whitening, oral surgery may be required.
Another common cause of lack of confidence for young adults, especially men, are hair loss issues. Some young men can start losing their hair as early as their teenage years. There are quite a few options nowadays for hair regrowth or hair replacement services for both men and women.
One of the best investment tips for young adults is to invest in education. Getting an education will give a young adult a huge step ahead in life. Having a specific knowledge or training that comes from a formal education will help a young adult set themself apart as they enter the career force. Those who get an education have been proven to be wealthier, have more opportunities in life, and are happier overall.