Investing #FinancialPlanning #PersonalFinance
How much should I invest at 18?
As an 18-year-old with a steady income and some money already invested, you’re already ahead of the game when it comes to financial planning. Now the question is, how much more should you be investing at this stage in your life?
Start with a solid foundation
Before diving into specific numbers, it’s important to establish a solid financial foundation. Here are a few steps to consider:
- Create an emergency fund: Aim to save at least 3-6 months’ worth of living expenses in a high-interest savings account.
- Pay off high-interest debt: Prioritize paying off any high-interest debt, such as credit card balances, before investing more money.
- Set clear financial goals: Whether it’s saving for a house, starting a business, or retiring early, having specific goals will help guide your investment decisions.
Consider your current financial situation
With a monthly income of €1500 and minimal expenses, you have the ability to save and invest a significant portion of your earnings. Here are some factors to consider when determining how much to invest:
- Calculate your monthly expenses: Subtract your monthly expenses, including "fun money," from your income to determine how much you can realistically invest each month.
- Review your current investments: Take stock of your current investments, like the Vanguard FTSE All-World ETF, and assess whether you’re comfortable with your current investment strategy.
Determine your investment goals
When deciding how much to invest at 18, it’s important to consider your long-term financial goals. Do you want to retire early, own a home, or start a business? Your investment strategy should align with your goals.
- Consider your risk tolerance: As a young investor, you have time on your side to weather market fluctuations, so you may be comfortable with a more aggressive investment approach.
- Aim for diversification: Look for opportunities to diversify your investment portfolio to reduce risk and maximize potential returns.
Conclusion
Ultimately, how much you should invest at 18 depends on your individual financial goals, risk tolerance, and current financial situation. By taking a proactive approach to financial planning and investing, you can set yourself up for long-term success and financial security. Remember to regularly review and adjust your investment strategy as needed to stay on track towards your goals. Happy investing! 🚀
The more you invest now the less you have to invest later. In that regard, do what you can to take care of your future self.
As much as it feels reasonable. Structure your life around affordable yet fun hobbies. The real super power doesn’t come from investing, it comes from keeping your costs low and maintaining low costs through your life. Dinners out and drinks are one time experiences that are very expensive. Books and Internet Access have much greater returns on enjoyments. Visiting State or National parks is another affordable way to travel and take vacations. Access to affordable housing and home ownership is often the things that make or break people. The more you save the better, but it’s preferable to focus more on how you spend your money instead of how much money you save.
It isn’t about how much you invest, it’s about how much you spend. And you should spend just enough to live a modest lifestyle your content with.
As an exercise make a spreadsheet for the next 20 years of your finances. It can be at a high level estimates. Project where you’ll end up with your expenses, income, and investments. If you do this you’ll be ahead of 99% of other people your age in terms of being financially educated.
At 18 with no expenses. Keep about 3-5k in an emergency fund and aggressively invest and save the rest. You’ll have a cash pile to fall back on late once you move out and be way ahead with your savings by the time comes when you can’t afford to put away much.
You’re starting early which is fantastic. How much you ‘should’ invest is all dependent on what you want your future life to look like.
My advice? Put in as much as you can while still being able to reasonably enjoy your young life. Savings/investing is important (and its best to start as early as possible) – but when you’re 18-23ish, I wouldn’t turn down experiences/opportunities just in favor of saving more than you already are.
But of course this is all up to you. Putting in every extra dollar you have into investing isn’t going to ‘hurt’ you in the long run. There will just be the opportunity cost of not spending money on extra experiences. Some people get a lot of satisfaction from just saving, but IMO this can lead to an unhealthy obsession with finances and frugality.
Another thing to consider – it’s also important to have a decent cash savings, not tied up in investments. I would aim for 3 months of living expenses in cash savings. This will help if you are ever in a bind and markets are down and you don’t want to pull your investments.
Honestly, I wouldn’t invest much. I did always save since I was young. And I think it’s very important to have that mindset, but I also think if you are already a person that saves you’ll be fine and you don’t need to drill yourself to do it.
Theoretical example, if you are 8 years old and get an allowance of 10 dollars per week or whatever. You could save that and have 2000 dollars after around 4 years. Or you could just have fun with it and when you are 15 years older, you earn those 4 years of saving in a month easily most likely.
My point, don’t invest because you have to and if you plan to have a career the money you can save now is a joke and not worth not living your life and enjoying things. (Obv not saying spend everything on nonsense and save nothing)
Invest as much as you can while still enjoying life.
At some point you should put together your downpayment for a home
All you can! Time value of money baby!
None. Right now you should be investing in *yourself* to increase your future earnings. Get the heck out of that 1500/month job and into something more lucrative that will let you actually invest instead of living hand to mouth.