Taking a decision to start your investment journey is a big one and we want to make sure that you are well prepared for it. Investments are a part of your financial wellness journey, but not the beginning.
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So before you take the plunge into the world of stocks, bonds and portfolios, consider the following things.
5 Things to Consider Before You Start Investing
1. The Budget Check
Do you make and follow a monthly budget? Do you have clarity on your fixed and discretionary expenses every month? Tracking your monthly budget closely can help you determine how financially fit you are. Are you spending on the right things or do you need to trim certain expenses? Your saving and spending habits will help you plan better for your long-term and short-term goals and accordingly, prioritize your investments.
Also read: 5 Budgeting Hacks That Really Work
2. The Debt Check
Are you currently in debt? Do you have loans that you still need to pay off? It won’t help your financial situation if you begin investing your money without clearing off all your debts. A good debt history will help you get loans in the future, so it’s important that you clear off your dues before deciding to invest your money.
Also read: 6 Ways to Reduce or Eliminate Debt
3. Do You Have an Emergency Fund?
Emergency funds are the backbone of your financial health. They provide cushion against life’s sudden and unexpected situations. Multiple experienced financial advisors recommend maintaining an emergency savings reserve big enough to cover three to six months of household expenses.
So, making investments in the absence of an emergency fund might require you to break your investments when an emergency arises. Hence for better financial security, ensure that you save up for emergencies first and then put your money in investments.
Also read: 5 Reasons Why You Should Make an Emergency Fund
4. The Insurance Check
Do you have an insurance cover for you and your family? Are you assets like your house, your car protected? Having a guard against theft, medical costs, damages can save you a lot of money in the long run. Having health, life, property insurance can take care of unexpected expenses as and when they arise and not risk your long-term financial goals.
5. The Knowledge Check
Knowing how much to invest where and when requires a lot of time and knowledge. So before getting started with investments, make sure you spend some time understanding the basics of various investment instruments.
Read up on stock markets, bonds, equities, assets etc. Talk to people you trust about different portfolio options and try to get a sense of which type of investments will be best suited for your financial goals.
You can always get in touch with a professional to help you out but it is best to be armed with enough knowledge before you go deep.
Also read: 10 Best Personal Finance Books For Financial Success
A thorough investment planning will help you make the most out of your investments in the long run. So consider all these factors before making a decision. Happy investing!
(Check out 'Learn & Grow with Wizely' to read and learn all about personal finance and financial planning.)