Once you have extra cash that you have set aside coming from your monthly salary, 13th-month pay, or even company bonus, it’s very exciting to look for investments in order to grow your money. But just because you have the right amount of money to start investing, doesn’t mean you’re a hundred percent ready for it. You may need to build up the basics first in order to have a solid foundation of your wealth-building journey.
Here, I prepared several questions to assess how ready you are before you start investing. Ask yourselves the same questions and be the judge if you’re already equipped to invest.
Of course, investing will all point out to your financial and life goals. Knowing your goals and prioritizing them based on their importance will give you an idea of your desired time frame to achieve those. In return, you will be guided with the right investments suited for your financial objectives.
Several folks fail to realize that there are short term and long-term investments. Short-term investments like time deposits and bonds are designed to mature in a year or less, while long-term investments such as stock market investments opt to ripen after five years or more. You just have to look for the right investment vehicles that could cater your financial needs based on your financial and life goals.
Investing means growing your savings. It is not a one-time capitalizing, but a consistent act of discipline. The more you save and invest regularly, the more your investments yield higher returns through compounding.
Before you start investing, you must invest in yourself first especially if you are the breadwinner of your family. Consider having health, life, and property insurances to protect not only you and your family from financial uncertainties but also your investments, especially if they haven’t ripened yet.
Having an emergency fund will safeguard you from unexpected financial shortcomings such as job loss without touching your investments. Ideally, an emergency fund is equivalent to your 3-6 months living expenses, but you can always have an amount which is reasonable to you.
Knowing your risk appetite will save you from a mini-heart attack while watching some of your investments fluctuate. Scale your risk appetite from one to ten. If your risk range is 1-5, then you must invest in less risky investments such as bonds and time deposits. If it is between 6-10, consider more aggressive investments such as mutual funds, UITF, and stock market. Just know that the higher the risk, the higher the return on investments. Older people are recommended to invest in less risky investments while younger ones are encouraged to participate in more aggressive investments since there is still a great amount for their investments to grow.
Obviously, spending more than what you earn will lead you to fiscal deficits, or worse –- debts. If you start investing without having upright financial habits, you will end up being frustrated in prioritizing financial necessities and wants.
Debt management is not just about refraining from having bad debts, it is also about avoiding lending money too much. Learn to set limits.
Be around with the people who share the same interests as you. They will help you in pursuing and improving your financial journey. The articles and books you read also play a great role in your financial wisdom. If you haven't found good books to read about investing yet, I suggest looking for volumes authored by Bo Sanchez, Robert Kiyosaki, Benjamin Graham, and Elon Musk.
Well, if your answers to the previous questions are positive, then I must congratulate you for having a solid financial background. If you haven’t started investing yet, try to do a not-so-little research that suits your financial goals, risk appetite, and investment allocations. If you started investing already yet you missed some points I’ve mentioned above, consider working on building a more established financial foundation.
It is good to start investing while you are in your early twenties. In investing, the earlier, the better, since there’s greater time for you to earn through compounding interests in your investments. But if you haven’t started yet, worry not. It is never too late to pursue your financial goals through investing as long as you have established a good financial ground.
