a woman planning her investments

3 Simple Steps to Creating a Winning Investment Plan

Learn how to map out your path to financial freedom and then take action

Over the years, I’ve been pleased to see the progress women have made to become more financially independent. Yet despite our forward momentum, we continue to trail men when it comes to planning for retirement. Perhaps that’s because a woman’s path to a stable retirement is filled with more challenges — things like the gender pay gap and time away from the workforce for parenting duties often negatively impacts her long-term finances.

I recently came across some startling statistics from the TransAmerica Center for Retirement Studies that further solidify my stance:

  • 31% of women are or have been caregivers during their careers and nearly all of them made at least one work-related adjustment as a result.

  • Only 12% of women are “very confident” they’ll be able to retire with a comfortable lifestyle.

  • 55% of women expect to retire after age 65 or don’t plan to retire at all.

  • Among the women who plan to work past age 65, most cite doing so for financial reasons.

  • Paying off debt is a financial priority for 65% of women; only 49% cite saving for retirement as a priority.

  • 32% of women expect Social Security to be their primary source of retirement income.

  • Women believe that they will need to save $500,000 in order to feel financially secure in retirement; but 54% of them just “guessed” at that number.

  • Only 14% of women frequently discuss saving, investing or planning for retirement with family and close friends.

Do you see why I’m concerned we haven’t moved the needle far enough? Women are still facing a crisis when it comes to their finances, and their retirement outlook is dreary.

Invest in your future

In order to prosper financially, it is imperative that women learn how to invest. Unfortunately, many don’t even know where to start. The good news is it’s not that hard — and it can be fun!

The following are three simple steps to creating a winning investment plan that can change your financial future.

Find out which asset class excites you most, and then drill down on the type of investments in that class that you want to learn the most about and put your time, money, and energy into.

For me, it was real estate. I started with single-family housing and then expanded into apartment buildings. I could have done commercial real estate, like office buildings or mini-storage, but I really fell in love with focusing on residential real estate. The best part is by drilling down on it, I became an expert in it — all while having a blast!

  1. Determine how much you can invest

    A lot of people make the excuse that they don’t have any money to start investing. For most people this is simply not true. Rather, they spend their money on any number of things that they don’t really need and then have no money left over. The problem isn’t that they don’t have enough money, the problem is how they budget the money they do have.

    When Robert and I were younger, we treated our investing as an expense in our budget. We determined how much we wanted to spend each month in investments, and we made sure that we paid that “expense” each and every month.

    This, of course, meant we had to take a look at other expenses in our budget and cut some of them in order to pay the “expense” of investing. Do the same. How much do you want to invest each month? What can you cut back on in order to make investing a priority? Make it a priority today, and it will become habit tomorrow.

    The other important thing to consider here is that you don’t always have to use your money to invest. For more on that concept, brush up on how to invest using other people’s money.

  2. Find out what you want to invest in

    Another reason many people are intimated by investing is because they don’t understand the variety of things available to invest in. For most people, investing means a 401(k) or the stock market. But the reality is there are so many other areas where you can invest your hard-earned money — you just have to find the winning investment plan that works for you.

    For starters, take a look at the four main asset classes:

    • Paper. Paper assets include stocks, bonds, mutual funds, and retirement accounts where you can invest in stock options, stock futures and foreign exchange. Paper assets also include real estate investment trusts, or REITs, and exchange-traded funds (ETFs).

    • Real estate. Real estate investments either provide cash-flow from rental properties (the overage you make each month from rent once all your costs are paid) or capital gains (a one-time profit from buying and selling a property).

    • Commodities. Commodities include metals (gold, silver, copper, etc.), food (grains, corn, coffee, and sugar), and raw materials (oil, gas, cotton, etc.). Commodities are generally a capital gains (or loss) investment, and you can buy future contracts of any commodity through the future exchanges.

    • Business. This is an asset that people have become more aware of thanks to television shows like “The Apprentice” and “Shark Tank.” Within this class, there are two routes to take: 1) invest in your own business or 2) invest in someone else’s private business or company. The whole point is to generate a return back to you, the business and your investors and/or lender.

  3. Make long-term goals

    Once you know how much you can invest and where you want to invest, establish your long-term goals. Write them down and revisit them often.

    For instance, if you invest in residential real estate like I did, maybe you make a goal of buying one rental house in your first year. Then maybe you make a goal of buying two in the second year. Then you could have a goal to purchase a small apartment building by year five. Whatever it is you choose to invest in, have a plan to go big in the long-term and stick to it.

3 steps to taking action

Ok, now that you have winning investment plan in place, it’s time to take some action. You can’t just daydream about your plan forever — the first step is always the hardest, I promise.

As I mentioned, my first investment was a small one — a two-bedroom house in Portland, Oregon. At the time, it was a such scary idea to purchase that property, because it felt like I was giving up a lot to make that investment. In reality it was just a few thousand dollars.

But that’s the irony of the advice to “start small” when it comes to investing: When you’re first starting out, nothing feels small, even when it is. It takes time to get comfortable with taking these leaps of faith and parting with your money — although the more research you do and more experience you gain, the less risky it is. After all, you still want to be able to sleep soundly at night.

After the first investment, Robert and I knew we were ready to graduate to larger investments and properties. So, we began investing in small, single-family homes. From there, we purchased a six-unit apartment building.

Do you see the progression? Baby steps. Today, we own more than 1,000 apartment units. Nearly every successful real estate investor I know started small, too. And so should you.

But what exactly does that mean? Let’s see what starting small looks like in reality:

  1. Take a deep breath

    The first thing you should do when you’re getting ready to make your first investment is simply to pause, take a deep breath and relax. Easier said then done? It doesn’t have to be.

    Do your best to put aside how you’re feeling and instead look at the facts and figures. What is the real risk if the investment fails? Chances are, very little. Maybe you’ll lose a little money and come out with some hard-earned lessons. Now, examine the risk from not moving forward. You’ll never grow, learn, or get closer to financial freedom. So, I ask you: Which is worse? I firmly believe it’s being stuck without any options.

  2. Build your confidence through education

    Do you still have dreams that you’re back in high school, it’s time for finals and you didn’t study and don’t know any of the answers to the test questions? I think we all do. And that’s one of the worst feelings ever — the fear of not being adequately prepared. A big contributor to investing anxiety is not feeling confident in what you’re doing due to lack of knowledge.

    “The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive.” —Warren Buffett

    That’s why it’s imperative you take the time to study and understand your chosen asset category (real estate, stocks, cryptocurrencies, etc.). This includes reading as much as possible and attending free workshops and online webinars. I knew I wanted to invest in real estate right off the bat, so even though I was nervous about making that first investment in Portland, I wasn’t worried about my ability to size up and find a deal. Being self-confident helped a lot.

  3. Think big even when investing small

    When getting started in real estate, I often tell people to start small with their first investment. However, let me be clear: This doesn’t mean you should think small. Quite the opposite, actually. You should think big when it comes to where you want to go and what you plan to achieve. The sky truly is the limit, so don’t add unnecessary boundaries to your dreams.

    Once you’ve got your goal (and hopefully it’s one that scares you a bit, as there’s nothing quite as motivating as a scary goal), break it down into bite-sized sub-goals so that you aren’t left paralyzed by where to begin. Always begin with the smallest step. Keep moving forward, first with little steps, small investments, and then progress to bigger steps. As your experience and confidence grow with each success — and yes, even through the setbacks — you will get closer and closer to your big goal.

    Final thoughts on a winning investment plan

    When I was buying the house in Portland, I knew that it was a first step in a much larger journey. I had grand dreams, but they started with a mere 800 square feet. So, my advice is always to start with a small investment and think big!

    If you follow these tips, they will pay off. Today, I own thousands of apartment units in multiple states. I planned to do this, but I started with just one little house. You can too, no matter the type of investment you focus on.

Original publish date: June 16, 2016