An Easy Guide to the Basics of Investing for Nurses

Alright, listen up nurse baddies, because I want to touch on investing today. I know it might sound intimidating but trust me—it’s not as complicated as it seems. Investing is a powerful way to build a secure financial future and make your money work for you. Want to save for a house, build a cozy retirement fund, or just have a safety net? Let’s break it down in a way that’s easy to understand. If you’ve made it through nursing school, you’ve got this!

Key Takeaways

Investing Basics: Investing is about making your money work for you, whether in the stock market, real estate, or other assets. It’s key to building wealth and achieving financial goals like retirement or buying a home.

Prepare Before You Invest: Before diving in, make sure you have a budget, an emergency fund (3-6 months of expenses), and pay off high-interest debt. Then, choose the right type of investment account like a 401(k) or a brokerage account.

Start Early, Stay Consistent: Time in the market is more important than timing the market. The sooner you start investing—even small amounts—the more your money can grow over time.

What is Investing?

Think of investing as putting your money into something with the hope that it’ll grow over time. People often talk about investing in the stock market, but you can invest in lots of things like education, real estate, or even your health. For the purpose of this post, the main idea is to make your money work for you, so it grows instead of just sitting in a savings account

What is the Stock Market?

The stock market is like a giant marketplace where people buy and sell shares of companies. When you buy a stock, you’re purchasing a small part in that company. Companies use the stock market to raise money for growth, and investors use it to try to make a profit. The stock market can be a bit like a rollercoaster—prices go up and down based on how well companies are doing and different economic factors. Despite its ups and downs, the stock market has historically grown in value over the long term, which is why many people consider it a good place to invest for future gains.

Set Clear Goals

Before jumping in headfirst, it’s super important to know your “why.” Why do you want to invest? Are you saving up for a dream home, planning for a comfy retirement, or just building up a rainy-day fund? Setting clear goals will help you stay focused and motivated. Break it down into short-term goals (like a vacation) and long-term goals (like retirement) so you know what you’re working towards.

Before You Start Investing

A few things need to be done before you invest your money. You need to make sure you’re financially ready, meaning:

Budgeting

First things first—track your spending. Know where your money is going each month and see if there are areas where you can cut back. This way, you can figure out how much you can afford to invest.

Building an Emergency Fund

Life is unpredictable, so it’s smart to have 3-6 months’ worth of expenses saved up for those unexpected moments. This emergency fund is your financial safety net.

Paying off high-interest debt

Before you start investing, consider paying off any high-interest debt. The general rule is to tackle debt with an interest rate higher than 6% before you invest, since the interest on these debts usually outweighs the returns you’d get from investing. But hey, this rule isn’t one-size-fits-all, so weigh your options and see what works best for you.

Time to Start Investing

Now that you’ve got your financial basics covered, it’s time to get started. Here’s what you need to know about different types of investment accounts:

Retirement Accounts: Many employers offer retirement plans like a 401(k) or 403(b). These are great because you can have money taken directly from your paycheck and get some tax benefits.
Brokerage Accounts: If your employer doesn’t offer a retirement plan, or if you want to invest outside of one, you can open a brokerage account. This includes accounts like traditional IRAs, Roth IRAs, HSAs, and personal brokerage accounts. You can set these up online with companies like Fidelity, Vanguard, or Charles Schwab.

Different Types of Investments

Stocks

When you buy stock, you’re buying a piece of a company. If the company does well, your stock’s value goes up. If not, it goes down. Stocks can be risky because the market fluctuates, but they offer the potential for higher returns.

Bonds

Buying bonds means you’re lending money to the government or a corporation in exchange for interest. Bonds are generally more stable than stocks but offer lower returns.

Mutual Funds and ETFs

These are like investment baskets. Mutual funds are actively managed by professionals who buy various stocks and bonds, while ETFs (Exchange-Traded Funds) are often passively managed and traded like stocks. ETFs usually have lower fees than mutual funds.

Index funds

These are a type of mutual fund or ETF designed to track a specific index (like the S&P 500, which includes the 500 largest companies in the US). They’re a good way to invest in a broad range of stocks at once.

Target Date Funds

These automatically adjust their mix of stocks and bonds based on your retirement date. They’re perfect for a hands-off investment approach.

Commodities

Investing in commodities means putting money into raw materials like gold, silver, or agricultural products. Prices can vary based on supply and demand.

Real Estate

Investing in real estate involves buying property. This could be a home to live in, a rental property, or a commercial space. Real estate can be a good investment if property values increase, or you can earn rental income.

Benefits of Investing

Investing can help grow your wealth over time, often at a rate higher than a regular savings account. It’s a great way to save for big goals like buying a home, funding education, or enjoying a comfortable retirement.

Understanding Risk

All investments come with some level of risk. Your risk tolerance is how comfortable you are with potential ups and downs in the market. Understanding your risk tolerance helps you choose investments that fit your comfort level and financial situation. Vanguard offers a free risk assessment to help you figure this out.

When to Start Investing

Here’s a pro tip: “Time in the market, rather than timing the market.” This means the longer your money is invested, the more it can grow. Even starting with small amounts early on can lead to big gains down the road.

Bottom Line

Investing should be on your mind as soon as you start your nursing career. It might not seem easy, but it’s totally doable with some knowledge and research. Starting early is the key. Even small amounts invested can make a huge difference and lead to significant financial growth over time. Don’t wait—set yourself up now for a comfortable financial future! If you want to hear more, visit my blog for weekly personal finance updates for all my nurse besties!