You want to jump into the world of investing. That’s great! But before you take the leap, you should make sure you do these four things first:
1. Save for Emergencies
Before you get into investing, you should start an emergency fund. An emergency fund is a financial tool that everyone should have. It acts as a perfect safety net whenever you need to cover an important and unexpected expense that doesn’t fit with your budget. You can simply withdraw from your fund, make the payment and move forward. You don’t have to panic.
What happens when you don’t have enough in your fund? In that case, you could apply for a personal line of credit. It’s an effective solution for situations when you need extra money to recover from an emergency.
Once you’ve used the line of credit to manage the emergency expense, you can focus on repayment and replenish your account. Not only will this help you repay what you’ve borrowed, but it will also give you credit to use again in the future when you need it most.
2. Pay Down Debt
If debt is still hanging over your head, you should ignore your desire to invest for the time being. You need to work on tackling this problem first.
Why is that? Well, most of your debt has the potential to grow with interest and overwhelm you if you’re not careful. You don’t want to put your finances in such a precarious position.
Plus, becoming (mostly) debt-free would be a huge accomplishment! Imagine what goals you can focus on without having to think about all of the repayments that you have to make.
3. Save for Long-Term Goals
Retirement funds, college savings funds and vacation funds are different types of investments that you should concern yourself with — they’re investments in your future.
By establishing these savings funds early and making a habit of contributing to them, you’ll improve your chances of reaching your aspirations and more. The earlier that you start these accounts, the better off you’ll be when you actually need them.
4. Do Your Research
It’s easy to get swept up in the buzz about cryptocurrency and the hottest stocks on the market, but this isn’t the advice you should be taking as someone who wants to get started in investing. These investing options that gain a lot of hype are often trendy and high-risk. People who are not in a position to lose money shouldn’t gamble on the possibility of winning big.
Ignore the riskier side of investing for now. It sounds fun to jump into the deep end right away until you’re treading water.
What should you do instead? Instead of listening to the hottest fads, take time to do some research. Look into what types of investments are low-risk so that you’re pretty much guaranteed to make a profit off of your decision — even if it’s a small one.
You’ll also want to get comfortable with investing terminology so that you can understand the advice given by experts in the field. It will also help you spot when someone is overselling their knowledge on the subject.
Investing is an exciting part of managing your finances, but it shouldn’t be your top goal. If you have other financial goals to reach, you should get to those first.