Investing can seem complicated. Investing, for many families, seems like the sort of thing that is unapproachable. Even for those that get over that hump and decide they should save for things like retirement, college, or other goals, have trouble getting started. Like so many things in life, it’s easy to say you’ll put it off until later. Procrastination is easy and letting things stay the same is all too easy. Do something different. All it takes is one percent of effort.
"a person who is just starting out in a field of activity" Abecedarian as defined by Merriam-Webster
Look at your benefits: 401k
About 4 out of 5 working Americans have access to a 401k or similar style retirement plan at work. Unfortunately, only about 2 out 5 Americans eligible to take advantage of this employer benefit, do so. Benefits are a big part of our compensation. If you had a friend that had a vision plan at work, but chose to not get glasses, would you think that was strange? If you had a family member who didn’t have health insurance, but had a plan available through their job, would you be surprised? Take advantage of this benefit as one of the easiest ways to get started as a novice or beginner investor.
Investing for beginners: Sign up
Some employers will ask you to “enroll” for a 401k just like any other benefit. If you’re eligible, this should be very easy. Some HR departments will require paperwork or a form, but more and more providers give an online option that takes minutes. Enrolling in your company’s 401k as a beginner does not require some vast financial knowledge or a big time commitment. You can do it.
How much 401k contribution should I make?
This will be a question as part of the signup process and where most folks get tripped up. 401ks ask you to select a percentage of your pay that will be invested. What percent should you choose to withhold? Can you even afford it? You might start to think about other obligations like children, things around you home that need attention, or all manner of other magnets for money. This is the roadblock many of us face. All you have to do is get started. Keep reading to see how.
One Percent: Investing for beginners with little money (or anyone else)
Percentages are sometimes difficult to understand or think about. One percent of a gallon of milk would barely be noticed in your coffee. Most folks would dump much more cream, milk, or something else into their cup of caffeine. Back to that gallon of milk. Would you notice if 1% of that gallon was missing? Would it impact the way you use milk over the next week to give up that small amount that barely takes up a few spoonful’s? One percent is the secret to getting started.
"She goes to inspect a field and buys it; with her earnings she plants a vineyard." Proverbs 31:16
Beginner 401k: One Percent Deferral
When it comes time to choose, start with one percent. You can always do more at that time or later, but one percent will get you started and that is key. By the way, this works with other retirement plans like 403bs or other plans that will let you take money out of each paycheck. One percent is a starting point that is attainable for virtually everyone.
How much 401k should I have?
This is a great question and one you will have to answer someday. If you never get started, it’s irrelevant. Get started, make saving a habit with one percent, and build on that over time. No amount of planning, spreadsheets, or apps will make a difference if you never get started.
Still think you can’t do it?
One percent is one penny out of every dollar you make. As a 401k beginner, you can do that. You won’t truly miss one percent of your paycheck any more than you would miss one percent of that gallon of milk. Get started and build on that success. If not now, when?
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