5 Things to Do Before You Start Investing
Someone, cue the shout music. A miracle just happened. It’s the end of the month, you stuck to your budget (for the most part) and now you actually have some money left over. So of course, you want to learn how to start investing.
This is not some random scenario. This is exactly what happens to so many of our clients who are excited to finally have some money in the bank. And after a few months of saving, the million dollar question is: what to do next?
Well, if you’re feeling yourself because you’ve been sticking to your budget, it’s only right that you learn how to start investing.
What is Investing?
Investing is basically spending your money with the expectation of making more.
When you invest, there is always some type of risk involved. Whether you’re investing in a home, a stock, or something else, there is a chance that you may not get your money back.
But if you play your cards right, there is also the chance that you can make money.
Balancing potential risk with the possibility of a reward is what investing is all about. And I happen to think that women are particularly good at it.
How to Start Investing
Making your money work for you is one of the best things you can do and very necessary in this economy.
But relax, sis.
Before you learn how to start investing, there are a few things you need to take care of first.
Part of being a confident investor is making sure that you’ve done all the pre-work. Although it may be frustrating to wait, It’ll help you to build a strong foundation that will prove to be useful in the long run.
Today, you are going to learn exactly what you need to do to before you can start investing and prospering like the queen that you are.
If you want, go ahead and download the pre-investment checklist. Use it to track your progress!
The Ugly Truth
While some of you are saving more than you ever have, many are not.
The secret shame of the middle class is that many Americans are balling out on debt while quietly living paycheck to paycheck. And slowly but surely drowning.
A 2017 survey conducted by Bankrate found that if faced with an emergency where just $500 was needed, over 40% of grown ass working adults would need to borrow the money, sell something, or would not be able to come up with the money at all.
Let that sink in. For 40% of people who go to work, a $400 emergency could be a life altering event.
But the truth is, I’ve been there. You may have been there. And the statistics say that we are all closer to there than we would like to admit.
That’s why I want to arm you with a powerful plan (and planner) that helps you build a foundation for financial success and eventually investing.
Today, we are going to look at the 5 things you need to before you even think about investing.
Step 1: Build Your Emergency Fund
Before you learn how to start investing, learn how to build a solid emergency fund.
Your emergency fund is the foundation of your financial success. It offers you leverage, protection, and peace of mind.
Start by suspending all unnecessary spending until you have $500 in an account specifically for emergencies. Then, work to get $1,000. Keep going until you’ve saved enough to cover 3 months of basic expenses.
It’s usually a good idea to make your emergency fund separate from your regular bank account so that you don’t have easy access to it.
Here are some resources I recommend to help you get started.
1. Ally Bank
These two banks offer really great options to start your emergency fund. Ally Bank is a little bit easier to use, but I started out with Capital One 360 and it always gets the job done.
Pick one, and start building your emergency fund today.
You should definitely have an emergency fund before you start investing because if something unexpected happens, you need to have liquid cash available.
I recommend having 3 months of expenses saved in an emergency stash before taking the plunge into becoming an investor.
That alone will give you confidence to make good decisions and the patience to see them through. Two good traits for a future investor. These two resources will help you accomplish this goal.
Step 2: Save for the Future
Look, I get it. You’re not a psychic.
But you can still plan for things you know are going to happen. This includes vacations, car maintenance, houses, weddings, kids, whatever.
Before you learn how to start investing, learn how to save for your future.
The trick to saving is to start WAY BEFORE you actually feel like you need to.
Remember, things are always closer than they appear and the sooner you start the easier it will be.
I don’t care if you don’t have a boyfriend, if you want an elaborate wedding, start saving NOW! Lol
This same logic applies to cars, kids, investment properties, etc.
And don’t fall into the trap of waiting for things to get better before you start saving.
As things get closer, chances are you’re going to feel like things are getting worse.
That’s just life.
Trust me on this. Find a way to save something (it doesn’t have to be much) as soon as possible.
If you want to save for specific things without opening multiple accounts, I have just the thing for you.
It took me months to find tools that work exactly how I want them too, but I did. For this, I recommend:
1. Smarty Pig for people who like to keep things fun and simple. (Web based)
2. Qapital for people who want lots of features and sleek design. (app based)
Obviously, both are very safe to use and will help you easily save for the things that are important to you. I love them both so much but because Qapital has more features (it’s an app!) I tend to use that more!
When you have money put away for things that are coming up, you can invest with confidence instead of fear of what may happe
Step 3: Save for the Future Pay Down High Interest Rate Debt
Paying down high interest rate debt is one of the best things you can do for yourself.
I know borrowing money might seem like a good idea at the time, but it hardly ever is.
Before you even think about learning how to start investing, pay down your debt. Seriously!!
How often does it make sense to pay someone to use their money? Exactly!
When you pay off high interest rate debt you are paying yourself back and saving money at the same time by cutting down your interest payment.
And while investing is cool, it’s probably not going to get you that 18% interest you’re paying on your credit card.
This website has a really dope calculator you can use to create a debt payoff plan that’s best for you. Check it out here.
Step 4: Do Your Research
As I mentioned in the beginning of this article, most people are struggling financially.
If you want to create a different financial future for yourself, you’re going to have to do something different.
Now is the time for you to learn how to start investing, but we’re still doing the pre-work.
First, read! Do some research to learn the basics of investing before you dive in head first.
And obviously, get a mentor. There is so much information out there it’s hard to know what’s what. The right mentor can help make sure you’re doing it right the first time.
There are so many times I’ve helped clients make thousands of dollars just by tweeking their investment allocation.
As you research, get a sense for what investing is and how it works. This will give you a basic framework to work from.
I also recommend that you learn from different angles because repetition increases retention.
Step 5: Set Specific Goals
Once you’ve done steps 1-4, it’s time to set your goals!
As you get started, you might not know exactly what to do or where to begin, so here are some basic questions to help you jump start your goals.
1. How much money do you want to start investing with?
2. What brokerage company do you want to invest with?
3. What type of investments are best for you right now?
4. How much are you able to contribute per month (Or quarter)?
Those questions will you get going in the right direction.
Investing can be a little bit intimidating but it is a necessary step in your financial journey. Why? Because if your money isn’t growing, it’s shrinking.
Investing is one way to help your money beat inflation, but it is also a good way to develop and flex your critical thinking muscles.
Although investing in the stock market probably won’t make you rich, it’s a good education to have as you start evaluating bigger and more profitable investments.
Without a foundation, anything that you build will crumble.
But with a strong foundation, anything that you build will be much easier to maintain in the face of challenges.
Now, it’s up to you!
Get our downloadable checklist to help you track your financial progress.
P.S Some of the links above are affiliate links. Each company is one that I use personally and they better pay me for sending you their way. xo