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*This post may include affiliate links. We get a commission if you sign up with a partner; this commission is at no cost to you.(Last Updated On: March 1, 2019)
Today we have a guest post from my friend Kayla. Enjoy!
If you’ve heard from friends, relatives, and others about how well they are doing with their investments and it’s making you want to invest too, you may have caught the investment bug.
That’s ok because it’s a good fever to catch.
I know because it happened to me. I found the more people I was around who were successful money managers and investors the more likely I was to want to be that way too.
But perhaps you haven’t yet gotten started investing yourself like I have.
If you are ready to get started read on because there are five must do steps before you start investing.
1. Create a Budget
One of the first things I did and you must do as well in order to get started investing is to create a budget.
After all, how do you know how much you can invest without one?
It would be kind of like trying to make a complicated dish in the kitchen without a recipe to guide you.
It sounds kind of impossible, doesn’t it?
To get started, gather your bills and then put a pen to paper, or plug in your computer. Make a list of your income verses spending so you know where you are at.
2. Control Spending
Another thing I did before I began investing is to get control of my spending.
If you buy whatever suits you without any thought of the consequences you are headed for serious money trouble eventually, assuming your income is limited like mine is.
Buy what you truly need and quit spending on more stuff.
Most of us have too much stuff as it is.
If you tend to spend more when you are upset or depressed try going for a walk or doing some other activity until the urge to shop goes away.
Emotional spending is one of the easiest and quickest ways you can sabotage your budget.
You may feel like you deserve it or you might convince yourself you need it even if you truly don’t. Instead try telling yourself you deserve to have less debt and a more secure financial future.
3. Pay off High Interest Debt
After creating a budget and harnessing my spending habits I began paying off high interest debt before I began investing.
Of course, depending on the rate of interest on your debt you might consider investing even though you are in debt. However, those high interest debts are killing your budget so pay them off and don’t run up more.
Once you accomplish this step you will be able to apply both the payment amount and the interest toward either other bills or investments.
4. Establish Goals
Establishing goals is the next thing I did before I began investing.
Figuring out why you are investing helps you to determine how to invest your money to meet your goals.
For example if you are investing toward a short term goal, like a new car or house in 5 to 7 years you likely aren’t going to want to invest in stocks. They provide a great return over the long-term, but for a short-term goal they can be too volatile.
On the other hand, as a long-term investment toward your retirement, for instance, they can provide significant returns.
Knowing what you are investing for helps you toward your next step.
5. Consider Options
Now that you know what your goals are you can consider all of your investment options.
One of your choices is to enlist the help of a financial advisor or investing company.
Of course, it would take you a little time to get together with them and determine what your best investment plan should be.
Or, you could save yourself some time and money by choosing to invest through an automated process such as a robo-advisor.
There is also real-estate as an investment option. Examine each thoroughly and understand the risks involved before you sink your money into something and find out later it isn’t what you expected.
Since you have caught the investment bug, putting your money into something that will provide good financial rewards is a smart way to better your future.
Follow these 5 steps before you start investing for the best future possible.
What other steps should you take before you start investing?
Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.
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