How to invest your money in a few simple steps

How to invest your money in a few simple stepsHow to invest your money in a few simple stepsYou have a great job and make a good income. Youve paid off your student loans and credit card debt. Now youre ready to save and invest. But youre bedrngnis surehow to invest your money.I have good news.Im going to introduce you to six basic steps on how to start investing your money. It will be unlike many of the other how to articles on investing. Before you think about investing a dime, we need to set the foundation. Without it, it will be difficult, if not impossible, to have a successful investment strategy.Follow Ladders on FlipboardFollow Ladders magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and moraIll list the steps first and then get into some detail to help you navigate each one.Six steps How to invest your moneyWork from your budgetDetermine how much you can saveThe best accounts to start taxable vs. tax-deferredFind the best investment o ptionsDiversifyMonitor and rebalanceNow lets get into the details for each to get you started.Principles to build wealthPersonal finance principles are not complicated. Executing them takes practice and discipline. If you wantto build wealth, you will need to do these three thingsSpend less than you makeSave and invest the differenceReduce or eliminate debtThese are common sense things. Living within our means, being disciplined about saving and investing and minimizing debt will allow us to build wealth over time. There are no get rich quick schemes that work. There are no short cuts. Doing these three things over a long period will give you the best opportunity to build wealth.Heres where to start.1. Investing for beginners start with a budgetI know, I know.Talking about budgetsis about as much fun as having a root canal. But if you dont know where your money is going it will be difficult to determine how to invest your money. Im not suggesting you need to be slaves to your budge t. Quite the contrary. But you need to know where your money is going every month to know to analyze areas where you might be able to reduce expenses and increase the amount available to save and invest.Many people use spreadsheets to budget. If youre not a spreadsheet person, consider some of the budgeting apps available.Mint.comandYou Need a Budget (YNAB) are two of the most popular. Both programs allow you to connect your bank accounts to pull expenses into the app. You can then set up categories to better manage where cash is going.If youve been disciplined enough to pay off your debt its likely you have some budgeting mechanism set up. If not, these two apps can help you get started.2. Determine how much you can saveYour budget tells you how much you can save and invest. Thats the foundation that must be in place to assure you can contribute a consistent amount togrow your wealth.Increase incomeIf you want to save and invest more money, increasing your income means you have mor e to save and invest. If youre working in a corporate job, look for ways to get promoted. Learn the art of negotiation when asking for raises. Become more valuable by working harder and doing more than whats asked of you.Look for ways to gain income outside of work. Finda side hustleor part-time work that has flexible hours and can bring in more money. The more money you make, the more you can save and invest.Emergency fundIf money for an emergency fund is not part of your budget, it needs to be. Whats an emergency fund? Its money you keep in a liquid (risk-free, penalty free) account that you can access at any time. Use this money to pay cash for unexpected expenses. If your car breaks down, you have an unexpected medical bill or any other expense, dont pay for these on a credit card. Use cash from the emergency fund.The emergency fund should have a minimum of three to six months of monthly expenses in it. So, if your monthly expenses are $1,500, you would keep from $4,500 (3 month s) to $9,000 (6 months) in the account. If expenses are $2,000, youd keep $6,000 or $12,000 in it.Some people keep one or more years of expenses in their emergency fund. Whatever amount you choose, be sure not to compromise that number. Financing unexpected expenses on a credit card will put you right back into the hole you just dug out of.After the emergency fund is in place, look at whats left over in your budget. The money to invest will come from money left after bills are paid and your emergency fund is full. If that amount is zero (it shouldnt be), then its time to look at where you can cut some costs. Since youve had the discipline to pay off debt, its likely youll have a good sum of money for investment.3. Investing for retirement choose the right type of accountIf youre thinking about how to invest your money, look at retirement accounts first. Remember, this is after youve set your budget, created your emergency fund and determined how much you can invest each month.If yo u have a career, its highly likely that your company offers its employees a retirement plan. These go under different names 401(k), 403(b), etc. The plans offer a way for employees to contribute money every paycheck to an investment account where the money invested grows tax-free as long as it remains in the plan.Company match = free moneyIn most cases, the employer contributes money to your account as well in the form of amatching contribution. They agree to match what you put into your account with their own money up to a certain percentage.Heres a common example. They offer to match your contribution up to 50% of the first 6%. For every six dollars that you invest, youre getting three dollars more from the company. Thats a 50% return on the first 6% you put into the plan. There is no other investment out there that offers a 50% guaranteed return.Plus the money you contribute is tax-deductible, meaning it reduces your taxable income by that amount. You pay tax on the money at the time you withdraw it at retirement Its free money and a tax deduction. Its truly the best investment you can make.The IRS allows you to contribute up to $19,000 of your own money into employer-sponsored plans. That means you can put a chunk money toward saving for your retirement.This article originally appeared on Melissa Blevins.You might also enjoyNew neuroscience reveals 4 rituals that will make you happyStrangers know your social class in the first seven words you say, study finds10 lessons from Benjamin Franklins daily schedule that will double your productivityThe worst mistakes you can make in an interview, according to 12 CEOs10 habits of mentally strong people