I hope you are doing well, wanted to share this scope I did this past Thanksgiving on investing as I get a lot of clients who often want to start off investing, but haven’t done the foundational things first.
I believe in investing, wrote 2 chapters about it in my book. But what I don’t believe in is putting the cart before the horse.
There are a few things you should have in place before you begin investing.
First – how are you currently managing your money. If you aren’t monitoring your spending online or on paper, if you don’t have an emergency fund or much money left after you pay your bills. It’s not time. Investing requires disposable income. If you after you pay all your bills, you only have a little left over… you want to work on increasing your income with a side hustle, second job, learning a skill that can increase your pay.
Second – How much of your debt is paid off? I don’t necessarily believe you have to be debt free, especially if you are over 35, but It doesn’t make sense to begin investing when you are making the minimum payments on debt or have creditors calling. Having a financial life plan is about strategy not stress.
You will want to have a significant amount of debt paid off and a serious plan for the debt remaining before you start investing.
What happens when you begin investing but don’t have…
- An emergency fund?
- Enough disposable income to do so?
- Your debt under control?
Your investing accounts don’t stay open long. That’s right, you will have to go get that money at some point and that my friends, is a horrible investing strategy. Investing is for the long haul, opening accounts only to have to close them a couple of months later is a waste of time. Create a strategy, a plan and follow it.
Third – The good thing is that while you are working on these areas you can become an investing expert. Do not go to a financial advisor or open an online brokerage account yourself without knowing what you are doing. You should know basic terms, you should understand how to read a stock table, how to research stocks, mutual funds. Understand what an index is. Otherwise you could be throwing money to the wind just so you can say you ‘got into’ investing.
An educated investor is the best investor. So bone up by reading the Motley Fool – love, love, love their site for the beginning to the savvy investor. Check out the Morningstar website to research stocks, mutual funds and their performance. Attend free or low cost investing seminars – please don’t spend a mint –there are too many free online webinars etc. where you don’t have to.
That’s my quick tip – check out the Periscope I did on this topic below and be sure you are following me @DorethiaKelly!