Everyone is not in a financial situation to start investing outside of a ready-made retirement account. Most people look at the increase of the stock market and only see the numbers and want to throw all their money onto Wall Street. I most cases, these are people who aren’t financially ready to invest and don’t have the mindset or the knowledge to make it work.
To even have a fighting chance in the stock market some groundwork must be done. All it takes is a little time, energy, education, and evaluation to get you on the right track. Here are 6 Things That You Should Do Before Investing in anything other than a saving account or retirement plan.
Know Your Net worth
Get Rid of Bad Debt
Make A Long-Term Commitment
Understand your Risk Tolerance
1. Know Your Net worth- Your net worth is the total value of everything you own. This is calculated by adding up the value of your home, car, any valuables that can be resold, and the balance of all your bank accounts minus the balance of all debts such as mortgage, credit cards, loans, including student loans.
This is a question of long-term versus short-term. In many cases, we think of our bank balance as the most important number in our financial picture. Although your checking and saving are important, they are what we will call short-term funds and offer a short-term perspective to our mindset. Investing requires a long-term mindset that needs to be based on your net worth, a long-term perspective. If you are still more concerned with bank balances than net worth investing might not be best for you at this time. Let’s do some mathematics if you have a credit card that has a 17% interest rate paying it down will function the same as an investment that offers a 17% return after taxes. If you pay off $100 of that balance, that’s $17 in interest charges that you don’t have to pay each year until the card is paid off. There is no investment out there that can even come close to that with any consistency.
2. Analyze- Take the time and analyze your current financial situation. Looking at your income vs. your expenses to assure that you are not spending more than you are bringing in is extremely important.
• Do not depend on credit cards to make ends meet and have an emergency fund.
• Your saving account should be for emergencies and your 6 months reserve only to be used in the event of loss of income. You should not have to rely on your saving to make ends meet on your monthly expenses
• Do not rob Peter to pay Paul; make sure that you are covering all your monthly current monthly obligations with your current income. You do not want to start an investment strategy and you are not forced to make decisions on what bill you should or should not pay.
3. Get Rid of Bad Debt- Starting to invest outside of your 401K is a privilege. The best way to earn that privilege is to get rid of your bad debt. Bad debts like credit cards are a great place to put extra money at the end of the month. Any loans or debts that are above 9% interest rate are the best places for your money. There is no investment that offers anything approaching a stable long-term return that beats what you’ll save from paying off your credit cards.
4. Make A Long-Term Commitment- Investing is a long-term commitment. Most stocks are very volatile and to see a real appreciation you will need to remain invested in the stock for at least 5 to 10 years. Therefore, you need to be a commitment to your investment strategies and make yourself a promise that you are in it for the long haul.
5. Get Advice- Becoming an investor is not something that most people just stumble upon. Get advice. Read investing books and articles, take courses, and talk to a financial advisor.
6. Understand your Risk Tolerance – Money should make you feel good and not give you a weekly anxiety attack. The best way to manage your emotions is to understand your risk tolerance. Risk Tolerance is defined as the degree of variability in investment returns that an investor is willing to withstand. Be true to your risk tolerance when you chose investments and only invest in assets and companies that you believe in.
If you can obtain these 6 strategies, you have a good chance at becoming a solid investor. Successful investors put themselves in a position to win. By preparing yourself financially, mentally and emotionally you can make sound decisions that will reflect your goal.
An accomplished Financial Advisor for 20 years, Cimone began to examine the medicinal and economic benefits of CannabisIndustry and how it impacts communities. She recognized the CannabisIndustry as an opportunity to build wealth and healing for anyone willing to learn and put forth the effort. TO LEARN MORE ABOUT CIMONE & HER VENTURES HEAD TO: ccimonecasson.com Facebook @ C Cimone Casson