Markets have been bleeding lately, so in periods like these it is good to return to the basics so we do not forget them.
Before we even think about investing, we need to do some necessary clearing out. Without foundations, nothing can be built. Preparation is the foundation of our investing journey. It is the step most people skip, and that is exactly why they fail.
So where does preparation begin? With having a stable source of income. Even better if we can increase it or add a second one. Unfortunately, you cannot invest if you do not have money. Income is the fuel for everything else. And even if it is small right now, what matters is that it is stable and that there is a plan to grow it in the future.
Imagine, for example, an employee earning €900 who decides to start a small online side activity, such as Etsy or Fiverr. After four or five months, they manage to earn an extra €150 per month, which they can direct exclusively toward savings or their first investments. Is that not great?
Once we have stabilized our income, we get rid of high interest debt. Credit cards, consumer loans, all of these drain every effort to save. We need to eliminate them before moving to the next step. It makes no sense to invest for an 8 percent return while paying 15 percent interest on a credit card. Zero debt means a clear mind and solid ground.
Finally, we start saving. We set aside at least 10 percent of our income every month, and we do it automatically. Not if there is anything left over. Savings come first, everything else comes after. The power of habit is enormous. If we learn to live on 90 percent of our income, everything becomes easier.
For example, if we earn €1,200 and save €120 per month, in five years we will have over €7,000 with zero risk, simply through consistency and discipline. This step, the preparation step, is perhaps the most important one because it helps us gain control, discipline, and calmness. It also prepares us for the next phase, our entry into investing.
WE START INVESTING
Preparation is over. Time for action.
If we are ready, we do not wait. We start investing immediately. We do not need to be experts from day one, but we do need to enter the game. The longer we wait, the more time we lose, and time is the most valuable asset in investing.
The safest choice for someone starting out is a diversified ETF.
An ETF that includes hundreds or even thousands of stocks across different sectors, reducing risk and increasing stability. We avoid specialized ETFs or high risk individual stocks and start with the simple options. Simplicity is power.