Note that this article assumes that you’re looking to grow your money over time and are willing to take some risk rather than just saving your money in no-risk, low-yield savings accounts and CDs. It is also assumed that you already have an emergency fund set aside that includes enough money to cover normal living expenses for six months should your income end suddenly. It is further assumed that you have no high-interest debt, such as credit cards. You would be further ahead paying off such debt rather than investing your money (because there are virtually no investments that would pay you as much interest as you would typically spend in carrying high-interest loans and other debt).
Pay yourself first. Set aside as much of each paycheck as you can for investing, no less than 10 percent of your income. Do this even if you can devote only a few dollars at first. Even $5 per week will add up over time. Try to cut your costs of living. Don’t deprive yourself of necessities, but try to cut out luxuries, anything you don’t have to have. Some of the wealthiest people in the world lived frugally when they first became serious about accumulating wealth.
If your employer offers direct deposit, consider sending a portion of each paycheck directly to your savings or investment account. If you never see that money, you won’t be tempted to spend it.
Discipline yourself to build up your emergency fund to six months’ worth of living expenses. You should also pay off any high-interest debt (at least 10 percent APR) you’re carrying. This is especially important in the likely event that the interest rate you’re paying on such debt exceeds the interest rate you could expect to earn with your investments. See how to decide whether to invest or pay off debt for more information.
If the interest payment on your debt is higher than what you’d be making with an investment, it’s probably not wise to invest at first. In this case, try to pay off all your debt before investing your surplus; that way investing will actually make you money instead of merely underwriting your monthly debt payment.
Learning about what’s available for investing in
Before you invest, educate yourself. You need to understand what investment options you have, how to read financial statements, how to analyze stocks (for quality, valuations, financial strength, growth potential, etc), as well as how to avoid investment scams and pitfalls, and where to find information.
Warren Buffett, one of the most successful investors ever, had read every investment book he could lay his hands on (at least 100 books by his count) before he turned twenty.