If you’re new to the investment game, it can be incredibly tempting to withdraw some money from your savings account and get stuck right in. After all, when you hear about the wild returns that some people make in the media and press, who wouldn’t want a slice of that pie? However, you won’t hear about the majority of investors that end up getting it wrong – and losing out big time. To prevent your investment experience going awry, it’s essential that you lay some serious groundwork first – let’s take a look at a must-do checklist you should be doing before spending a dime on a stock, slice of real estate or currency.
Invest in your future
First and foremost, how secure is your retirement looking right now? Your very first investment should be to ensure you are financially safe – and a 401k or Roth IRA is the best and most secure ways of doing it. All your contributions are tax exempt, and if you are lucky, you might have an employer that matches up to a certain amount of what you pay in. It’s free money, a low-cost way of boosting your retirement fund, and is an essential safety blanket.
Build an emergency fund
You might have a savings account, but do you have an emergency fund? The ideal emergency fund will have at least 3-6 months worth of your normal income – and should cover you for those inevitable financial emergencies that are inflicted on us a couple of times every year. It is essential that you establish this fund alongside regular savings account to ensure you have cash in the bank when you need it. Starting any kind of investment plan is foolhardy beyond belief without this critical safety net.
Pay down bad debts
Debt is not necessarily a bad thing – and plenty of successful financiers use credit to invest. However, it’s essential that you pay off your credit or high-interest debts before you get started in the investment game. Why? Well, bad debts usually accrue enormous interest rates – way higher than you can expect to gain on any investment. As pointed out over at debtconsolidation.loans, you could consolidate your debts, but only if the interest on offer is lower than your current deal. Alternatively, try and use the snowball or avalanche methods to blast your debts as quickly as possible – it will save you more money than you will make by investing.
OK, so once you have the above ideas in place, don’t start investing just yet. If you aren’t prepared to learn, study and wholly understand the investment world, you will fail – it’s pretty much guaranteed. You can find plenty of juicy investment tidbits on this blog, of course, and there are plenty of others out there to check out, too. And when you are just getting started, it’s also advisable to seek out some professional help. No matter how intelligent or ‘good with figures’ you are, there are experienced professionals out there who have been in the game for decades – and still lose money. Be humble and willing to learn, and you will limit your risk by a significant amount.