Now you’re saving money each month after cutting your expenses and want to know the best way to put it to work for the long run? Keep reading then…
Great job on creating a monthly positive cash flow! You should have your emergency fund set up as well as some extra money saved for short-term cash needs. You should be managing your debts. Knowing your average monthly spending is very important to keep your financial situation stable.
If you have met all of those goals, it’s time to set up your investing plan. You will want that $500 to work for you by investing it.
Good, Bad, or Flat Economy Does Not Matter
Creating a habit of regularly investing your monthly savings is going to help you build wealth over time. Do not worry about the economy so much if you have time to build your wealth. You can weather bear markets and economic recessions if you have time on your side.
How Often to Invest Your Monthly Savings
How about every single month? Remember a 401K plan at your job will automatically invest in your plan each paycheck. Do the same with your private investment accounts and add to them every month.
It’s better to do that at the same time each month. Either pick the beginning or the end of the month at first. You could do the middle of the month if you can remember to do it each month.
What to Invest In: The K.I.S.S. Principle
The simple and effective way to invest those savings is in a major stock index fund. You’ll want to find a fund that has very low fees. Higher fees will eat into your total investment returns. The US economy has been growing steadily over time and it’s a good bet to continue investing in the total economy in order to grow your wealth.
I personally recommend Vanguard as the company to invest in. They have an ETF index fund VTI and also an index mutual fund VTSAX. Both have extremely low fees.