By Karl Van Sielman
You might think you don’t have enough money to start investing. But you may be closer than you think.
If you can answer ‘yes’ to these three questions, then you may be financially ready to invest.
If not, then we’ll explain what you need to do first.
Q1: Are you free of any high‐interest rate loans?
You’ll want to pay off any high‐interest rate loans you may have before you start investing.
The reason is simple: you might end up paying out more as interest than you make from investment returns. Clearing expensive debts will put you in a better position to benefit from any growth on your investments.
Q2: Do you have enough money saved up for unexpected emergencies?
Build up your emergency savings and you won’t have to dip into your investment money from time to time.
You want at least three to six months of living expenses saved up. That way, if you do have to dip into your savings for an emergency, your investment money stays untouched.
Q3: Are you prepared to invest your money for at least five years?
The longer you invest your money for, the more time you give it to ride out any bumps in the market and potentially produce overall growth.
The value of investments can go down as well as up and you could get back less than invested. You need the confidence to hold onto your investments for the longer term and stick to your financial goals.
If you answer ‘yes’ to these three questions, then you may be financially ready to invest.
If you answered ‘no’ to one or more of these questions, then you may want to pay off any loans, build up any savings and put long‐term financial plans in place first.