Are you tired of hearing about stocks, crypto, bull or bear market, or other financial terms that throws you in a loop? I understand it can be overwhelming and confusing when no one ever taught us about financial literacy! It doesn’t help that almost every social media platform or mainstream media continues to spew financial soundbites of the impending U.S. market crash, bubble, or the next meme stock! All, of course, are valid, but that doesn’t change how finance can be daunting for some. This is why our team at ArchiHacks thought today’s topic would be a nice change of pace!
Did you know the average net worth of an individual under 35 is around $76,300 with a median of $13,900? It’s not a surprise since many of us graduate with crippling student debt and surging living expenses that can bleed us of our funds. With a bad head start, it doesn’t help that designers may not always have the highest salary, so we thought it might be a great time to share some investing 101 tips! So buckle up your seat belts because I’ll share some rudimentary financial knowledge and how it can complement our architectural knowledge and skillset! It’s important to note that the financial journey will never be linear, and everyone’s journey to financial freedom will be different.
Disclaimer: I’m not a financial expert, so it’s important to research and be aware of your financial position.
Debt-Free
It’s no surprise here; before you start investing, it’s important to clear up any debt you have! Loans tend to have above-average interest rates, and in essence, they work as a negative investment. Architecture school can be costly from school loans, study abroad programs, and supplies; nonetheless, it’s important to settle any debts. I recommend tackling any high-interest debts, including any credits cards with any consumer charges, and then get to any school loans you may have. This is because school loans often have lower interest rates that won’t eat up your bank account versus a credit card with an average interest of 16%.
What does that mean?
Suppose you have a debt of $1,000 on a credit card with a 16% interest where you made monthly payments of $200. It would take you 6 months, and you would’ve paid an additional $42 off of just interest alone! There are countless calculators online that would help you visualize what these numbers mean better!
It’s not always necessary to pay all your debts first before you start saving. However, If you happen to be a natural spender, it might be wise to save slowly over a period of time than all at once. I love this phrase, “pay yourself first,” because it forces you to put aside money before paying any necessary bills! Besides, having additional untouched money can be a healthy nest egg for any occasion! This is why most savvy financiers recommend having three to six months of living expenses or income in a savings account to offset any financial emergencies!
I recommend having any high-yield savings account to store your emergency fund, and there are plenty of options based on personal preference and availability. I want to note that a savings account is beneficial for those financial emergencies worth up to half your annual income. After that, it’s better to invest your money in other avenues with a higher return on investment.
Interest is the monetary charge for the privilege of borrowing money, typically expressed as an annual percentage rate (APR). Interest is the amount of money a lender or financial institution receives for lending out money.
Interest rate is the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal or original amount borrowed; it can also be described alternatively as the cost to borrow money.
Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.
Invest in Yourself
Whether investing in programs is too expensive or doesn’t fit your goals, it might be beneficial to invest in yourself! What does that mean? It could be courses on programs, public speaking, or yoga classes! A good investment is taking care of your physical and mental health, leveling up your knowledge, or giving yourself a break. As much as we want financial freedom, it’s crucial to know when to take a step back from work and life to better your future. I would argue that learning how you work best will help you take strides in opportunities or financial freedom.
What about a hobby that you enjoy doing to destress? Is your hobby a financial hole? How about considering it a way to monetize that? However, I must say take that with a grain of salt because not all hobbies are meant to become a means of income; rather, they can be enjoyed. Social media can allude to monetizing everything, but some things are just meant to be enjoyed. This is another avenue of supplemental income that you could consider if it aligns with what you envision for yourself.
Invest in Equipment and Tools
If you are feeling more serious about your hobbies and additional money after getting debt-free, picking up a side hustle can be a way to expand your avenue of income and expand on your interest area without feeling guilty! Monetizing your skills and interests could mean you have to buy some equipment. Although it can be expensive, some tools can save you the time to do more productive activities and open up new possibilities of expression. For example, you can utilize your skillset and knowledge in programs like Autodesk, Adobe, Affinity, etc., which can allow opportunities to supplement your income! Here are some side-hustle ideas architects can pick up. Any supplemental income will only help with future financial investments or planning! Having an additional $100/month to help with groceries or investments will save you so much in the long run.
If programs aren’t necessary, do you need other tech equipment that will streamline your process or give you an advantage? Take a step back to see if this is something that fits with your goals and priorities. It’s okay if this is not you. There are other ways in which you can leverage yourself and your investments for your future.
Invest in the Industry
Last but least, if you have everything else covered or are not interested, use your leftover funds to invest in the market! Investing in the stock market is a great way for passive income, and there are several ways to influence the Architecture, Engineering, and Construction industries! Before we get into that, two ways owning a stock has a positive effect on your financial journey. One, the stock price increases from the original value you purchased that stock and you decide to sell, giving you a profit. The second, owning a stock can give you dividends. This is important because dividends are a great passive income flow that you don’t have to worry about!
What happens if you lack knowledge or time to put forth into investing? A great way to start investing hands-off and no headache is looking into robo-advisors or accounts that automatically rebalances your portfolio! Disclaimer, different robo-advisors have different requirements, so make sure to research what works best for you!
A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. Units of stock are called “shares.”
A dividend is the distribution of some of a company’s earnings to a class of its shareholders, as determined by the company’s board of directors. Common shareholders of dividend-paying companies are typically eligible as long as they own the stock before the ex-dividend date.
- A bull market is the condition of a financial market in which share prices are rising or are expected to rise.
- A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.
Real Estate Investment Trusts
An immediate option to get into the AEC industry is real estate, specifically REITs or Real Estate Investment Trusts. Wholesale purchasing homes and flipping will require knowledge and large amounts of initial funds that not everyone is privy to. This is why REITs are a perfect compromise.
REITs or Real Estate Investment Trusts is a company that owns income-producing real estate that can span from offices, shopping centers to commercial forests. This allows you to indirectly own real estate at a fraction of wholesale purchased homes. By law, REITs are required to pay out 90% of taxable income to their shareholders! This means just having $20 in any REIT can immediately start your journey of passive income and freedom. Albeit it may be minuscule at first, your money needs to have time in the markets to compound.
Invest in Products
Like any good investor would say, put your money into things that you use! Take notice of your desk. What do you see? A computer, a mouse, a monitor, maybe a microphone? Well, some companies specialize in the development and manufacturing of those products, which you could invest in. Companies that produce architect’s bread and butter software like AutoCAD (Autodesk) and Photoshop (Adobe) are also listed publicly. Always be careful with the stock market, though. Share prices are sensitive to the market conditions and companies’ performance.
What happens if you don’t know what to invest in at all? You could consider putting your money into an ETF or Index funds that follow markets like the S&P 500. There are countless index funds with different priorities, so it’s important to consider what fits your needs. Index funds-backed ETFs are great starters for beginners as they have proven to provide steady growth with relatively small volatility.
An exchange-traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other assets, but which can be purchased or sold on a stock exchange the same as a regular stock.
An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover.
Profit describes the financial benefit realized when the revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.
The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly traded companies in the U.S. It is not an exact list of the top 500 U.S. companies by market capitalization because there are other criteria to be included in the index. The index is widely regarded as the best gauge of large-cap U.S. equities.
We hope you found this article helpful. Investing can feel like a distant subject, but once you understand how closely they are related to our everyday lives, you might start finding them interesting and rewarding. At the same time, be careful not to over-commit yourself that it distracts you from your career and day-to-day life. Ultimately, the reason to invest in things is to give time back into your life to pursue other endeavors, enjoy your hobbies, and live!
If you want to learn more, my favorite resource of research and information is Investopedia. Well, that’s all we have for you today, and if you’ve made it this far, you deserve a cookie🥠. I hope you found this article interesting and took something from it! Sharing is caring! We hope to provide you with valuable insights and share them with someone who might find this useful. Make sure to follow our Youtube and Instagram for more content!