VI Blog

Simple Guide on Investing Money for Beginners

22 Jul 2021

Simple Guide on Investing for Parents | Pauline Teo
(c) Sadie Xiao

Investing money should be a no-brainer for adults in Singapore (or wherever you are). By now, you would've heard of how it's actually a bad idea to leave all your savings in the bank because of our enemy called inflation.

I know it could be intimidating at times. You could feel discouraged. You'll doubt if you can successfully invest your money. You'll even be distressed in looking for where exactly to start.

First of all, I get you. I used to be like that, too! For beginners, investing money can really be quite scary. It's like you're preparing yourself to jump off a cliff so high you don't know where you're going to end up afterwards.

See also: Guide to Investing in Singapore

And because I know that same feeling, I want to help you out. After all, I believe everyone can invest their money as long as they have the proper guidance alongside them.

So if you’re looking for a simple guide to investing your money as a beginner, you’ve come to the right place.

Believe me, I know your budget- and time-related concerns as I’ve been there and done that. But believe me, too, when I say that these concerns can all be addressed. How? Read on.

First, set up your financial goal

Before we do anything, we make a plan. It’s the same in investing your money. You have to have a concrete idea of what you want to achieve and write it down. Think of this as an anchor from where all of your next steps will be hinged upon.

Let me share with you the very first financial goal that led me to where I am today. Ten years ago, I wrote this: “I would like to achieve a passive income of S$60,000 by 2020.”

I made my goal SMART – specific, measurable, agreed upon, realistic, and time-based. And for those of you who know my story, I actually achieved this goal earlier than 2020.

Why did I want to have a passive income of S$60,000? It’s because I calculated my family’s expenses at that time and found that we need this amount to live comfortably. I wanted to have a passive income so I won’t rely too much on my job just to make ends meet and send my children to good schools.

In shorter terms, I wanted to be financially free. I’m sure you want the same, so let me take this opportunity to share with you what financial freedom really means.

I’d like to use Robert Kiyosaki’s definition (Kiyosaki is the author of the best-selling book Rich Dad, Poor Dad, and I strongly recommend you to also read his book). He says you’re financially free ‘when your passive income exceeds your expenses’. Take note, there is an emphasis on passive income, which again iterates my point that everybody should invest.

Going back to your goal, it will greatly help if you first calculate your expenses (don’t forget to anticipate the inflation) and then come up with a financial goal just like mine. How much do you need annually? How much do you need to be financially free? What timeline are you looking at?

Once you have your goal, write it down. You can even post it on your wall so you are reminded every day of what you intend to achieve.

Paying yourself first is also important

If you're a parent like me, you'll always think about this one thing: our children’s needs should be our only priority. Yes, they’re our top priority, but we can have other priorities, too.

We also need to pay ourselves first. What I mean by this is to allocate 10% of our monthly income and save it for ourselves.

Put it in a fixed deposit account or a separate savings account or a checking account. This fund will then serve as your investment money – you can either keep it in the bank or invest it in stocks or other options.

What’s important is you save some for yourself, which in the long run, will impact your entire family’s life should you choose to invest it wisely.

Adjust your expenses

Now that you’re thinking to invest, review your monthly or annual budget. What I do is I segregate between needs and wants, and I focus on the needs. This includes food, education, shelter, clothes, and health. Things that don’t fall under these categories are not necessary for daily living and I consider them wants and luxuries.

Simple or economical living is not something to be ashamed of. As long as we provide for the basic needs of our family, we can be proud parents. Extravagant birthday parties, branded clothes and shoes that will be outgrown anyway, and lavish vacations can be postponed, or perhaps minimised, while you pave your path to financial freedom.

Before investing, you must also always ensure that you have enough money for the rainy days. For me, accident and hospitalisation insurance are essentials. You need to always have the foresight to be ready in case of unfortunate events.

See also: Money Money Home: Talk Money with Sharon Au and Darren Lim

I also recommend that you start investing when you have savings equivalent to six months of your expenses or three months of your salary. This is to ensure that you have enough to get by even when circumstances like unemployment happen.

Find the right method and the right mentor

Nothing beats having the proper method and company. I have known this even before I met Ken and Clive, that is why I stumbled upon VI College. I knew I need to invest, but that was a vague goal. I did not know how to do it the most profitable way.

When I attended the Millionaire Investor Programme in 2011, that’s when I knew about the value investing strategy and how it is applied. I found my mentors and a helpful community of like-minded investors who are always willing to help. I always think that my investing journey has been a really fruitful one, not just in achieving financial freedom but also in gaining a family I never knew I needed.

When you have completed all these steps, then you can start your marathon toward your financial freedom. The next step then is to learn more about the method you want to use.

If you’d like to consider me as your mentor, come and join our free investing bootcamp. Here’s your special signup link:

~ Pauline Teo