You decide to invest monthly for something. Whether it’s for retirement or a large purchase, you want to know how much you’ll have when you need the money. Establish an easy-to-follow, concrete plan that will keep your mind off money worries. Although we live within a dynamic economy, it’s best to stick to an investment plan. Use a system that integrates your expected earnings and length of time you need to save.
Things You'll Need
- Pen or pencil
- Account ledger book
Set up a Monthly Investment
Decide how much you’ll budget each month for your investment. Know your monthly income. A good rule-of-thumb is to set 20 percent of your after-tax income aside for saving, according to MSN Money’s Liz Pulliam Weston. For example, if you earn $4,000 a month, set $800 aside per month for investment.
Know how long your monthly investment will take before you need it. If you’re saving for your 5-year-old’s college expenses, know that you need 156 monthly contributions (13 years) before using it (assuming your future 18-year-old will attend college). Using the $4,000-a-month income example, investing $800 a month for 13 years leaves you about $125,000 (without interest).
Choose an account to save in. If you prefer personal banking, certain banks offer many account services ranging from savings accounts to retirement plans. Many offer great interest rates to boost your investment. To be safe, choose a fixed interest rate that won’t change with financial trends. For example, Bank of America offers 1.75 percent fixed interest on certificates of deposit of at least $1,000. To put this into perspective, you could have an additional $17.50 for having $1,000 in the bank.
Set up a direct deposit system from your income source to your bank account. Most employers give you this automatic pay option when they hire you. Knowing your pay periods allows you to set money aside for the monthly contribution. Using this system gives you less trips to the bank while keeping you on track of your investment.
If you have a long-term investment, be aware of anything that could hurt it, like inflation, job loss or any other large, unexpected expenses. You may have a noble saving plan, but external factors through the years may, and will, compromise this goal.