How to Create Your Personal Investment Nest Egg (for Beginners in 2024)

Money is made and lost every single day in financial markets.  Most people would remain spectators in this capitalism game.  But have you ever thought about how much of this fortune could be yours?  Your personal investment nest egg is the slice that is hidden in the big global financial pie.  You can achieve the financial freedom you desire by beginning with questions.  How do you make a financial nest egg?

A financial nest egg – sometimes called an investment nest egg or financial freedom fund, can be created from a plan.  The next step is to determine what you want, and when you want to achieve it.  You will build investments that will give you the life you yearn for.  That’s how an investment nest egg works in retirement;  You could work optionally and live life by your own terms.

What is an Investment Nest Egg?

How do you make a financial nest egg as a beginner?  From the beginner’s perspective, a financial nest egg is a priority investment fund.  You create it to assure your financial independence.  This was traditionally the Roth IRA, and other special benefits accounts you initiate through an employer.  But today we live in a global economy that is heavily digitized.  There are many folks that are creating digital brands and building side hustles the world over.

The old format for creating a retirement nest egg is no longer valid today.  This brings us to adopting new insights into post-employment income and early retirement.  Your financial nest egg must serve your unique needs and generate reliable and dependable returns.

What are the Basic Elements of the Financial Nest Egg fund?

How do you make a financial nest egg from scratch?  How an investment nest egg works in retirement is determined first by the goals you begin with.  Without complicating the process, simply write down ten (10) things you’d want to achieve financially in your life.  List your top financial priorities for both the long and short-term.  Be as flexible or as informal as you can.  You could always modify your list later.

Here is a typical example of a list of 10 financial goals:

1. Become a millionaire by age 40
2. Retire from active employment in 5 to 7 years
3. Becoming more consistent in budgeting
4. Create an emergency fund
5. Save for College (self / the kids)
6. Invest for the kids
7. Start / Pay off the mortgage
8. Save for a wedding
9. Pay down the debt burden
10. Start an online business

Goals & Objectives of Your Nest Egg

How do you make a financial nest egg plan or goal?  Use the proverbial S.M.A.R.T goals technique to nail your goals.  The acronym stands for Specific, Measurable, Achievable, Relevant, and Time-based.  They act as a guide to help you produce better results.

Break them down into sub-objectives.  For example, if you want to become a millionaire by age 50, determine how many years you have left to reach that milestone.

If you are a 25 year old – you’re looking at 25 more years to start investing to compound money.  Using simple arithmetic, it will take you to save $40,000 each year to reach the goal (assuming you didn’t earn any interest or pay taxes).

How an Investment Nest Egg Works in Retirement

How do you make a financial nest egg for retirement purposes?  So you want to retire rich and hopefully earlier than usual? You can shorten your time horizon to just 10 years and you start with just $12,000 in year 1, you would need to save just $1,000 a month (from the example above).  To grow to a $1 million, your investments should return approximately 40% per year on average. (Keep in mind that this example uses simplified calculation.  Actual returns may differ based on a number of factors)

Other factors that require consideration are taxes, income growth, additional income streams, and a better investment multiplier.  Don’t forget about life’s emergencies.  You and your loved ones may experience financial and/or health issues that are certainly unplanned.  This takes us to the next most significant elements in a financial nest egg, an emergency fund.

Emergency Fund

How do you make a financial nest egg if you don’t have an emergency fund in place? You simply have to get one created as fast as you can.  Your emergency fund is your modest approach to preparation for financial uncertainties.  These financial emergencies occur in everyone’s life – in one way or the other.  Although they may surprise you, you can have adequate financial contingencies to help weather the storm.

An emergency fund typically has 3 to 6 months (or more) of your living expenses saved up.  This store of funds will help pay for unforeseen emergencies in the near (or distant) future.

Here’s how an investment nest egg works in retirement with an emergency fund

Your emergency fund is kept in a high-yield savings account with above average returns compared to a normal savings account.  The idea is to keep is as liquid or agile as possible to deploy it quickly when it is needed.

Your emergency fund exists to afford you monthly cash withdrawals in the event of a job or income loss.  You can cash out to finance other health emergencies or critical repair work on your home after a natural disaster – for example.

Discover how to maximize your emergency fund for maximum results.

Emergency Funds exist to guard your nest egg from premature withdrawals

How do you make a financial nest egg secure using a contingency fund? The fund becomes a personal insurance policy for solving short-term money problems.  The end game of the emergency fund is to solve that unexpected financial problem.  Your next move is to replenish it.

Yes, you’d have to rebuild that rainy day fund to its original state.  This will keep you safe and ready for the next emergency.  The most important reason for creating this fund is to protect your investment nest egg.  Your financial freedom nest egg needs to grow and compound.  There shouldn’t be an interruption through unplanned withdrawals in times of emergencies.

Sage Tip:  When should you start an emergency fund?

How Much Do I Need for Retirement?

How do you make a financial nest egg to pay you during retirement?  A very common question when you’re planning to retire within a decade or two (or even less).  Depending on which state or country you’re in, retirement could be somewhere between the ages of 59 to 69.  But a typical number is 65.  As these numbers do count when setting financial goals, the most important variable is the fund amount.

This sum is the money that will allow you to live a dignified life in your golden years.  If you’re planning to retire much earlier, the goal amount should be more ambitious.  To show you how an investment nest egg works in retirement, consider a typical scenario:

The average cost of living for a year for the average American is estimated to be about $50,000 (rounded).  You may need about $1,250,000 (estimated) in retirement savings to retire.  With the assumption of making 4% annual withdrawal (The 4% Rule) on the fund.

We’re again estimating to have inflation of a maximum of 3% (on average), and a safe investment vehicle such as the S&P 500 index fund.  This broad market index fund has performed at least ~7% average returns for decades.

Sage Tip:  How to save stock investment cash for retirement

This basic framework does not seek to be arithmetically accurate.  I’m just showing you how possible it is to build a real investment nest egg that will serve its purpose for your retirement needs.

Budgeting & Saving for Your Nest Egg

How do you make a financial nest egg budget?  Simple.  You make room by living below your means.  Budgeting and saving money is a crucial foundation for setting the ball rolling.  How would anyone come up with the annual investment deposits needed to fund their nest egg? Your budget need not be complicated or boring.

You can use the 50-30-20 Budget Rule to manage your money.  The objective is to allocate your after tax income when they’re due into three (3) main categories.  Use 50% for your needs (home, food, transportation, and other essentials).  Then assign 30% for your wants (entertainment, eating out, etc).   The final 20% is your secret weapon – savings.

Investing Your Surplus

How do you make a financial nest egg allocation?  You do this by investing your savings intelligently in the best way possible.  The stock market has proven to be one of the most powerful engines for financial growth.  But if you don’t know how to pick stocks, your best substitutes are Index Funds, or Exchange Traded Funds (ETFs).  These are how an investment nest egg works in retirement to compound.

Before embarking on stocks or ETFs, ensure that you’re paying down debt with all or a portion of the savings cash.  After debts are crushed, the next logical priority should be emergency savings.  If you’re new to this, expect some natural pain and discomfort within a couple of months.  You’ll go through artificial scarcity, and bar yourself from some of the comforts you’ve been used to in the past.

Debt Annihilation

How do you make a financial nest egg fund when you’re in debt?  When it comes to debt, you don’t need to live with the mindset of the masses.  It all starts with a basic mental shift.  Simply put, Live Within Your Means!  This is the rational tradition of using only money you’ve earned to pay for life’s expenses.  Going forward, you, you’ll learn to live below this borderline to create a surplus.  These are the savings that will produce that financial freedom we’re talking about.

Make a List of all Your Debts

How do you make your financial nest egg work sync with your debt repayment plan?  To start paying off debt, total how much debt you’ve got on your plate.  It helps to build a small debt profile and have some vital information about each debt.

These are the important elements of each debt:

• The name of the debt or account
• Kind of debt (car payments, student loan, credit card)
• Balance remaining
• The interest rate of each debt (in %)
• The terms of payment of the debt
• The minimum monthly payment

Debt Repayment Strategies

How do you make a financial nest egg when extra savings are designated for paying off debt? You simply have to choose a debt repayment method that would suit your purpose.  They’re the Snowball method, the debt Avalanche method, and the Debt Consolidation method.

1) The Snowball Method

The Snowball Method is a debt repayment plan that focuses on paying the smallest debt amount first.  Once you pay it off as quickly as possible, it creates the momentum to move to the next smallest debt.  You use the same designated amount to settle each liability on your list.  This is a great confidence booster – giving you a win in a short time.

2) The Debt Avalanche Method

The Debt Avalanche Method focuses on paying the highest interest rate debts as quickly as possible.  When this hurdle is cleared, it is also a confidence booster.  You can also start paying the minimums on all other debts in your list.

3) Debt Consolidation Method

The Debt Consolidation Method works by merging and combining all your debts into a single account.  This unified account actually fosters focus, and possibly produces lower interests on your payments.  It is best to avoid any other new debts by reforming your money mindset permanently.

The end-game is to ensure that you don’t return to that ugly place anymore.  Become an interest receiver, rather than an interest payer.  This debt annihilation exercise will make room for you to save towards your financial nest egg.  Read a detailed process for paying off debt here.

Conclusion: How Do You Make a Financial Nest Egg Grow Faster?

Your financial nest egg is your savior if you desire freedom in your golden years.  This fund may sustain you in your retirement but could achieve far more than that.  You could live the life you love within 10 years or even less.  This is simply how an investment nest egg works in retirement planning.  But an early retirement agenda will require more aggressive strategies for faster growth.

Investing in ETFs for example will give you a comfortable – yet slow ride to financial freedom.  On the other hand, building an online brand or side-hustle alongside a standard career will produce the leverage that will take you to your wealthy place much sooner.

Share with me in the comments below.  Do you have an Investment Nest Egg in place, or are you looking to designing one from scratch?

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