- Do a financial audit
- Ask yourself or your investment coach, are you financially fit?
- It will give you a clear view of the true state of your finances and may also identify areas where you can make savings
- Pay off your debt
- get rid of all your debts; credit card, car loan, personal loan, home loan, etc
- if you have high-interest debts, you should be paying those off as your highest priority, far above any sort of thoughts about investing
- Have an emergency fund
- This is the money that you put aside for emergencies. Establishing an emergency fund must be a priority before you start investing.
- As a thumb rule, you should build an emergency fund which should be greater than at least three times your monthly expenses.
- Set goals
- What are you investing for? What are you going to do with the money?
- One of the key principles of investing is to never invest without a purpose. Differentiate between short-medium and long term goals.
- Get health insurance/coverage
- ensure to get adequate coverage for both yourself and family members
- Experts suggest one should have insurance cover of at least 10 times of one’s income
- Being medically insured can help you avoid facing financial instability in the future and enables you to get the best health treatment
Additional: Seek professional advice (financial advisor or planner)
- He/she will be able to point out what’s missing from your financial plans, and help you identify financial goals and how your investments may achieve them
- Even if you plan to have an advisor handle your investing, you should still take the time to understand the things that your money is going to be invested in. Simply trusting someone else to handle it is usually a bad move.
- What is the risk you feel comfortable to take by investing? There is an easy rule for investing. The higher the return the higher is the risk. The lower the risk, the lower is the return. Everybody who tells you something different is wrong and just handle in his interest and not in yours.
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