Investing can be an excellent way to grow your money. However, you shouldn’t be doing it if it means that you’re risking the clothes on your back or the roof over your family’s head. Remember, your money used for investing needs to come out of a separate pot – one that isn’t linked to the money you use to pay your mortgage or deal with essential bills.
So, how do you know for sure if you’re actually ready to start spending your money on long-term earnings? The following tips will help to guide you in the right direction, so you know you’re not jumping into the investing world too quickly.
Auditing your Financial Situation
While conducting a complete evaluation of your financial situation might not seem like the most exciting way to spend your time; it’s something that’s definitely worth doing. Not only do you get a closer view of the state of your finances this way, but you might find opportunities to save more cash that you can put towards your investments too.
Start by listing off all your sources of income, from freelancer fees, to salary, and income from other existing investment. Once you know where all your incoming money comes from, you can begin to look into where your money is going out. For instance, maybe you’re paying off a loan that you need to consider when you’re thinking about how much money you have to invest. Or perhaps you’re considering taking out a loan so you can afford to make some extra steps in your investment portfolio.
Going through all of your statements in-depth will help you to see whether you can really afford to start investing yet, or whether you need to make a few changes to your strategy first. If you can’t find enough cash for in-depth investments, think about updating your budget.
Plan for Emergencies First
While your savings might not make you as much money in the long-term as your investments – they’re valuable for other reasons. For instance, you need your emergency savings account so you can pay for any dangerous situations that suddenly appear in your life. After all, we can’t always predict when we’re going to need some extra cash for things like a broken car or a new AC unit.
Most financial experts will tell you that although investing is always a good idea, it’s something that should come as a secondary consideration to other kinds of savings, such as your emergency account. Make sure that you have a few months of income put away into an emergency account which you can use to pay things like unexpected bills or sudden costs.
Once you’ve got this fund built up, you can rest assured that you’re going to be able to afford to make your investments without having to worry about relying exclusively on loans if anything goes wrong. Remember, you can use your financial audit to determine exactly how much money you need in your savings account. Most people prefer to have a few months of income, plus a little extra, just in case they end up losing their job with very little warning.
Get the Right Advice
Finally, once you’ve assessed your financial situation thoroughly, and made sure that you have some money aside for emergencies, you can think about getting some extra advice from experts. There are plenty of financial professionals out there that can help you, including personal finance experts and expert advisers. Although some of these people cost money to work with, most will offer you a consultation for free, which might help to steer you towards a better action plan for your long-term financial goals.
If you can’t afford to pay for your own advisor when you’re making decisions on how to spend your money, you might find that it’s a little easier to simply do your own research. These days, there are guides online for virtually everything. You can use the internet to learn how to trade on the stock market, earn money from forex, and more. You can also take personal finance courses online too if you’re having trouble figuring out which step to take next.
Remember, knowledge is often very important when it comes to becoming financially independent. The more you know about how to protect your investments and build your money over the long-term, the more you’re likely to accomplish overall.
Are you ready to start investing? Only you can make that choice.