I want to start investing, should I finish cleaning up my credit first? Should I get a Financial Planner?

Question

I'm a 22 year old single mom. Just trying to be smart with my money. Any suggestions on how to get started would be great.

Answer 1

Depending on the funds you have available, it would be smart to clean up outstanding credit first. Unless you can find an investment option that will return greater dividends/interest than you are paying on your outstanding debts.
My advice would be to find a high interest bank account and put any excess funds into that until you know what you are looking for. Go to your local bank and ask about Fee Free, High Interest, At call accounts...... or visit a few bank web sites for the same info.
Financial Planners are generally not be interested in small-time investors,[Unless you are considering investing into Superannuation], you would need to be investing a considerable amount for them to take the time to advise you. Note that they also charge fees....

Answer 2

Ok, start saving before you try to do any major investing. Put your money in a regular savings account for now. You need a place that draws a bit of interest but will allow you to remove the money when you need to and keep the money safe. There are other places to put your money, but where you are in the game you should not worry about those. You will learn about them later.

Go and check out some books on personal finance. I would suggest starting with Personal Finance for Dummies. A great beginner guide.

Work on your credit while doing all of this. Save some money, apply some money to paying off debt, and then live off of the rest. You may need to change your budget to do this. The personal finance books will be helpful. Learn as much about your options. Don't jump into this blind. By the way, the goal of saving the money is not so much for investing but more for emergency fund. You need that money to help you out if you lose a job or something of an emergency nature. Once you have a bit built up and have learned about your options in investing, then go and start to work.

By the way, someone mentioned a Roth IRA. That is a pretty good idea. If you start now, then you will have a very nice sum built up by the time you retire and it has some wonderful tax advantages. You will learn more about them.

Answer 3

I would first start a small savings account so you have funds to pay unexpected expenses that always come up. They say 3-6 months of living expenses is best.

You might try an online savings account like HSBCDirect.com for a savings account. It is FDIC insured and you can earn 5% interest. (I'm not affiliated with the company.)

Another option would be US Savings Bonds. You can buy those at most banks or your employer might have an automatic deduction available from your regular paycheck. You have to hold them at least a year before you can cash them but if you start with $25 or $50 a month, it will add up over time.

One website I like to read is actually a financial columnist who I've followed for a long time. He has a simple investing formula called "couch-potato investment portfolio" that is very simple and is usually in the top 75% of all portfolios.

Answer 4

I would not suggest paying a financial planner.

First, save as much as possible and get the credit cleaned up.

Get yourself 3-6 months of living expenses saved up in a savings account. This money is for emergencies. ie car breakdown, etc.

Once you have that in place, then look to investing.

A good place to start is with a Roth IRA.

Do a internet search on "IRA Basics" and read up on them to understand exactly how they work.