Investing is one of the best decisions that you can make with your money. It’s great for your future and it’s even a good way to gain an extra source of income.
But it’s a big decision too, and one that a lot of people don’t really think enough about before they actually take the plunge.
They hear about the potential for extra money and they just go ahead and jump on the chance to throw their money at investments.
If you want to really get the best financial benefits out of investing however, you need to do it the right way. You have to get yourself prepared first. Here’s 5 things you should do first.
- Ensure That Your Family is Onboard
For some people this doesn’t apply. If you’re single and you don’t have anybody relying on you than you can probably just skip this step.
Also, I’m not talking about your parents. Well, unless it’s there money that you’ve decided to invest with but that’s a different story.
If you’re married, or you have a long-term relationship that you have some amount of financial investment in, always make sure that your partner knows about your plans.
Having a family to think about means that you can’t afford to take any risks with your money unless you plan on taking them together.
If you don’t tell your spouse beforehand and they start noticing that the money is disappearing from your account into an investment account, things could get very messy.
The worst case scenario is you lose a ton of money and your marriage ends. That doesn’t happen every time someone is dishonest with their spouse about money but it has happened.
So make sure they’re onboard before you make any investments.
- Pay Off Any Debts
As far as I’m concerned, investing is something that you should do with extra money that you’ve got.
Like after you’ve budgeted out your expenses, what’s left over can go into investments. If you have outstanding debts, then you don’t have extra money.
This does include your credit card bill. Whether or not you should be using a credit card at all is a topic worth discussion, but don’t invest if you need that money for a credit card debt.
I also wouldn’t go near investing if you have any loans that you need to pay-off, especially high interest ones.
If you have a mortgage then that’s different of course, but any other debts really should be paid off with the money you may be thinking about investing with.
I’d be optimistic about the returns of most investments if you know what you’re doing but you can never guarantee success.
You don’t want to put yourself in serious financial trouble by throwing away money that you technically don’t have to throw away.
- Research. A Lot
You have to make sure that you’re going to be investing in the right places. The only way to do that is by doing an awful lot of research on the companies that actually sell shares.
Find out which ones are reliable when it comes to a positive, long-term Return on Investment (or ROI as it’s commonly abbreviated to).
You are never going to be able to predict the stock market yourself and statistically, companies that do have a high ROI for their investors will continue to do so in the future.
Invest in reputable stocks, not the ones that you just happen to like the sound of. You could end up losing an awful lot of money by investing carelessly.
You can also try and find out if there’s any companies that offer dividends to their investors. This is a good way to guarantee some income from your investments.
With a bit of research you can find the best companies with high dividends.
- Change Your Spending Habits
Like I mentioned earlier, I think the best course of action is to invest what you have left over after you pay all of your expenses.
Depending on your spending habits, this could be a substantial amount or it could be very little. It could also fluctuate from month to month.
If you’re investing very little, you will get very little ROI, it’s as simple as that. Even if you’re investing in the right places.
If this is something that you actually want to try, you’ll need to prioritize it over certain things. You might have to sacrifice some stuff you spend on that you don’t actually need.
And you will also have to have just a set amount every month that you can spend at your leisure and stick to that set amount.
If you look at what you’re spending money on, you’ll probably realize that there is some things you can cut out. Find as many ways to save as you can and invest the remainder.
- Have an Exit Strategy
I’ve said this once or twice already, but you can never be 100% guaranteed success when you’re investing.
In most scenarios, things will work out if you invest in the right places, but there is always the possibility that a reliable stock could plummet.
You need to adequately prepare for this. If the one possibility that you’ve got in your line of sight is investments working out and then they don’t you’re in trouble.
Make sure you know in advance how to react to a situation like this. Have an emergency fund so that you don’t end up out of pocket.
And treat this emergency fund as one of your expenses. Do not spend any of it unless you find yourself in trouble from a failed investment.
Conclusion
So ultimately, investing in some promising shares is a good financial decision and it can set your up nicely for the future.
Like any venture that you make in your life, you need to be prepared. Take these steps before investing a single penny and you should be on the right track.
