After years of scraping by to pay off my debt, the thought of investing for the future seemed daunting. For so long, I was focused on making sure my bills were paid, eliminating my credit card balances, and handling the immediate financial stress of living paycheck to paycheck. It felt like retirement or investing for the long term was a distant thought.
But once I had paid off my debt and built up a small emergency fund, I realized something important: it wasn’t too late to start investing, and I couldn’t afford to wait any longer. The earlier you start investing, the more time your money has to grow, but that doesn’t mean you should put it off just because you feel like you’re “late to the game.”
Here’s how I approached investing after paying off my debt and how you can get started too, no matter where you are in your financial journey.
- Start Small, But Start Now. One of the biggest obstacles I faced when thinking about investing was the feeling that I needed a large sum of money to begin. In reality, you can start investing with a small amount, and every little bit counts. I decided to start with a modest amount—just a few hundred dollars—and slowly began to put it into an investment account.
The key is not to let the fact that you don’t have thousands of dollars to invest hold you back. The earlier you start, even with small contributions, the better. Over time, those small amounts can compound into something much larger.
- Educate Yourself About Investing Options. Before I jumped into investing, I did a lot of research. I wanted to make sure that I understood my options and the risks involved. I started with reading books, listening to podcasts, and watching educational videos about investing. I also talked to a financial advisor to get a better sense of where to begin.
Some of the basic investment options I learned about included:
- Stocks and ETFs (Exchange-Traded Funds): These are great for long-term growth, and while they can be volatile in the short term, they tend to do well over many years.
- Bonds: A more stable, less risky option than stocks, but with lower returns. Bonds can be a good way to balance your portfolio.
- Mutual Funds: These are managed funds that pool money from many investors to buy a diversified set of stocks or bonds. They’re a great option if you’re looking for diversification without having to pick individual stocks.
- Retirement Accounts (401(k), IRA): These accounts allow you to invest for the long-term with tax advantages. A 401(k) might come with employer contributions, and an IRA can offer tax-deferred or tax-free growth, depending on the type.
I took my time to understand the differences between these options and how they aligned with my long-term financial goals. It’s important to know what you’re getting into before you make any investments, especially if it’s your first time.
- Set Clear Investment Goals. Before I put any money into investments, I asked myself why I was investing. Was it for retirement? A home purchase? A big trip in the future? Setting clear goals helped me decide how to allocate my investments. I focused on long-term goals like retirement first, but I also made sure to keep some money in more liquid investments in case I had shorter-term goals.
Having a clear direction helped me stay focused and avoid emotional decision-making in the face of market fluctuations. Whether you’re looking to build wealth over time or save for a big life event, knowing your end goal will help you create a strategy that works for you.
- Automate Your Investments. After paying off my debt and building up an emergency fund, I wanted to make sure I stayed consistent with my investing. So, I set up automatic transfers from my checking account to my investment accounts. This made it easy to stay disciplined and ensure I was consistently contributing to my future without thinking about it.
The great thing about automating your investments is that it becomes part of your routine. You’re making investing a priority without having to constantly worry about whether or not you’re doing it. Plus, by automating, I was able to take advantage of dollar-cost averaging, which means I invested a set amount consistently, regardless of whether the market was up or down.
- Diversify Your Portfolio. One mistake I almost made when I first started investing was putting all my money into one type of investment. Whether it was all in stocks or all in bonds, I realized that this was too risky. By diversifying my investments—putting some in stocks, some in bonds, and a portion in more stable assets like real estate or cash equivalents—I was able to reduce my risk while still setting myself up for growth.
Diversification doesn’t just apply to the types of investments you make. It also means balancing risk. Stocks are riskier, but they can provide higher returns, while bonds are lower risk but offer more modest growth. A balanced portfolio helps you weather market ups and downs without losing sleep.
- Avoid Trying to Time the Market. When I first started investing, I found myself wanting to time the market—buying when I thought stock prices were low and selling when they were high. However, I quickly learned that market timing rarely works, especially for individual investors. The market is unpredictable, and it’s hard to know the perfect time to buy or sell.
Instead, I focused on a long-term strategy. I knew that I wouldn’t be able to predict market fluctuations, but I could invest consistently over time. This helped me avoid the stress of trying to “beat” the market and instead focus on steady, long-term growth.
- Revisit Your Investments Regularly. While I automated my investments, I made sure to check on my portfolio regularly—at least once a quarter. I wanted to ensure that my investments were still aligned with my goals and that I wasn’t overexposed to any one asset class. I also took time to rebalance my portfolio if needed, which might mean selling some investments and buying others to maintain the desired allocation.
As you invest over the years, life changes, and so will your financial goals. Reassessing your portfolio regularly will ensure that it evolves with your needs and doesn’t fall out of alignment with your long-term objectives.
Investing after debt may seem intimidating, but it doesn’t have to be. The truth is, you’re already ahead of the game by eliminating your debt and building an emergency fund. Now, it’s time to make your money work for you and start planning for a secure future. Whether you start small, educate yourself, or set clear goals, investing is an essential step to achieving long-term financial independence.
Start now, even if it feels like you’re starting late. It’s never too late to take control of your future.