Experts told us how to start investing, even if the only thing you’ve ever invested in is your shoe collection

Every January, we look forward to a fresh start in the New Year. We buy journals to hold our ideas and planners to organize our calendars. And, of course, we set New Year’s resolutions to become our best selves. This year, we’re making our most responsible resolution yet: learning how to start investing.

Some people get overwhelmed by the thought of investing. They worry that it’s too confusing, that they have too much student loan debt, or that they don’t have enough money to start. Instead of taking control of their finances, they push them from their mind, vowing to worry about them in the future. If you can relate, don’t worry—we’ve been there. But we’re here to tell you that investing doesn’t have to be scary. In fact, it’s pretty easy once you know what you’re doing, and you can even start today. Promise.

We spoke with Grant Sabatier, author of Financial Freedom, and Erin Lowry, author of Broke Millennial Takes on Investing, about how to start investing.

They outlined different investing options, explained how to pick an investing strategy, and offered investing advice for those still paying down student loans.

If you’re ready to get serious about saving money in 2019, here are answers to some common questions about how to start investing:

Do I need a lot of money to start investing?

“Absolutely not,” Sabatier says. “You can start investing with as little as $5. The key is to invest consistently. So even starting with $5 a month is a great starting point. Then I tend to recommend that you invest at least 10% more each month when you’re starting out. So if you invest $50 one month, try to invest at least $55 the next month. It helps if you invest right when you get paid—paying yourself first.”

I’m ready to start investing. What are my options? Do I have to go it alone?

“First, if your company offers a 401(k) or 403(b) investing account, then take advantage of it,” Sabatier says. “These accounts allow you to invest pre-tax money, meaning you don’t have to pay tax on the money that you invest until much later when you take the money out in the future. This means you have more money to invest because you’re not being taxed on it (a.k.a. it reduces your taxable income). Many companies offer a match of 2%-5% of your salary when you contribute to a 401(k) or 403(b), which is completely free money. You should always contribute at least the percentage of your salary to get the match. It’s like getting a 100% return on your money! Always try to invest as much as you can into a 401(k) or 403(b) because the tax benefits are amazing. If your employer offers these plans, check with your HR department. They can help you make the most of these benefits and investing opportunities.

If your company doesn’t offer those accounts, then open a Roth IRA (individual retirement account) to start your own investing with tax benefits. The IRS lets you invest up to $6,000 per year into a Roth IRA and your money will grow tax-free. A few reputable companies to open an account with are Vanguard, Fidelity, and Betterment, who can help you set up a Roth IRA through a simple phone call.”

Is seeking help or hiring someone expensive?

“I’d recommend reading personal finance blogs to learn more on your own,” Sabatier says.” A great easy-to-read book on investing is The Bogleheads’ Guide to Investing.”

How should I pick an investing strategy? Does it help to set savings goals?

“You actually need two investing strategies,” Sabatier says. “One for the short-term (money you’ll need in the next five years) and one for the long-term (money you’re saving for the future). Don’t worry, having two strategies actually makes it easier to invest. Your short-term investing strategy should be less risky than your long-term investing strategy because you don’t want to have your investments be down when you plan to spend the money. So, any money that you plan to use for anything you want to buy in the next five years (like a car, a down payment on a house, education expenses, etc.) you should invest in either a high-interest online savings account or CD (certificate of deposit). Don’t invest your short-term money in the stock market! But money that you’re planning to save for retirement, and anything beyond five years, you should invest in the entire U.S. stock market. This is easy to do by investing in what’s known as a total stock market index fund ETF (exchange traded fund). Look for a total stock market or S&P 500 index fund in your company’s 401(k) or 403(b). Or, if you don’t have access to those at your company, then open a Roth IRA.”

Ideally, how much money should I invest every year?

“The simple answer is as much as you can,” Sabatier says. “Try to save at least 10% of your income and then increase your investing rate by 1% every 30 days. Trust me, you won’t notice it. By the end of the year, you will be saving 22%, which is better than 99.9% of people in the United States. At my peak I was saving 82% of my income and it helped grow my investments really quickly. Start where you can. The most important thing is to just get started. Don’t worry, even if this sounds confusing, it won’t be soon. Just get started and you’ll learn along the way. The earlier you start investing, the more your money can grow.”

Is transferring money from a checking account to a savings account enough?

“Yes, for your short-term investing,” Sabatier says. “But for long-term investing, you can’t invest in the stock market through a savings account. You’ll need to open up an investing account like a 401(k), 403(b), Roth IRA, Traditional IRA, or brokerage account. Don’t worry, it’s easy to do.”

I’m still paying back my student loans. Should I still invest?

“Yes, you should be investing when you have student loans,” Lowry says. “We say ‘save for retirement’ but it’s really ‘invest for retirement.’ That money shouldn’t be sitting in a savings account or money market fund, it should be in the market. It’s totally reasonable to make paying off student loans a financial priority, but it’s best strategy for future you that today’s you invests money for retirement.

If you have access to an employer-matched retirement plan, then you absolutely should be putting at least [enough to] get a match into your 401(k) or 403(b). For the self-employed, you don’t have the benefit of an employer match, but you shouldn’t procrastinate for a decade to start investing for retirement. Even if you have student loans, you should be setting aside a small percentage of each paycheck to put into a retirement account. One way to make this a habit is to increase the amount you set aside for paying quarterly estimated taxes. It’s generally advised to set aside 30% of each paycheck to pay Uncle Sam, but instead, you could save 35% and the remainder, after paying taxes, gets put into a retirement vehicle like a SEP IRA or Solo 401(k).”

Are there any finance apps that can help me invest?

“A lot of investing apps are nice supplements to an investing strategy, but they shouldn’t be your investing strategy,” Sabatier says. “For example, Digit, Acorns, and Peak are great savings apps, but they should be used in addition to your other primary investing strategy.”

How do I invest in a socially responsible way?

“It completely depends on your definition of socially responsible,” Lowry says. “Unfortunately, a problem with common index, mutual, or exchange traded fund investing is that some of the companies in a fund may not align with your value system. For example, there could be companies that manufacture cigarettes or alcohol. There could be weapons manufacturers or companies known to use unethical outsourcing practices.

One step is to look into funds that adhere to Socially Responsible Investing (SRI) or Environmental, Social and Governance (ESG) standards. However, just because a certain fund falls under these labels, that doesn’t mean every company in the fund aligns with your specific set of values. You could also look at impact investing, which often more thoroughly vets companies and their social good.”

Is investing risky?

“Yes, investing is ‘risky,’ but the great thing about it is you control the risk,” Sabatier says. “You can invest in ways that are less risky. Whenever you are investing, you are always looking for the right balance of risk and reward. If you take no risk, then you will get little reward, and vice versa. While investing might sound complicated now, you can learn the best investment strategies pretty quickly and easily invest in a less risky way.

It also really depends on what you invest in. I typically recommend stocks, bonds, and real estate as the most stable and consistent types of investments. The reason is because we know a lot about them, and they’ve been around a long time. If you invest the right way in stocks, for example, you can minimize your risk and maximize your rewards. Never put all of your money into one stock; always buy a diversified group of stocks to minimize your risk.”

What are some common misconceptions about investing?

“One common misconception about investing is that it’s only for wealthy people,” Lowry says. “You don’t need a lot of money to get started. In fact, many people are already investing thanks to their retirement plans. But, because we say ‘saving for retirement’ instead of ‘investing for retirement,’  people often overlook the fact that they’re already investors.”

Why is it important to start investing now, when I’m young?

“The simplest reason it’s important to start investing now while you’re young is because you have the advantage of time,” Lowry says. “Time is your greatest asset for two reasons. One, you have more time to weather the ups and downs of the stock market. And two, you have more opportunity to let compound interest do its thing and help grow your money for you. Starting young and being consistent means you have to invest less in order to grow a bigger nest egg than if you wait a decade or so. You may even double down on contributions in the future and not be able to catch up to what you would have if you started young. The other consideration is that life doesn’t tend to get less complicated. Maybe you aren’t earning as much and have student loans now, but in 10 years you might have kids, a home, a medical issue that’s come up. There’s no promise that it’ll be easier to start investing in 10 years.”

“There’s a reason Einstein called compounding the 8th wonder of the world: because it makes you rich,” Sabatier adds. “Just google ‘compounding’ and it will blow your mind. There are two ingredients to compounding: money and time. And when you’re young, time is on your side. Invest, keep investing consistently, and time will take care of the rest. Start investing today. If you wait a few years, you’ll likely have missed out on tens, if not hundreds of thousands, maybe even millions of dollars in potential growth over your lifetime.”

What’s one thing I can do right now to form better financial habits?

“The best thing you can start doing, no matter your financial situation, is to educate yourself,” Lowry says. “There are so many resources out there, from books to blogs to podcasts to TV shows to courses, that there’s really no excuse. Something exists that will match up with your learning style and interests, so don’t give up just because one or two things you tried didn’t work perfectly.”

Any words of advice before I start investing?

“One, only invest in things you understand,” Sabatier says. “Two, if it sounds too good to be true, then it probably is. Three, never put all of your money in one investment. And four, invest as much and as often as you can.”