Getting into investments is one thing, but knowing exactly when to invest can be tricky. If you’re new to the investment field, not knowing when you can invest can be a bummer. And when people tell you “it’s hard knowing when to invest,” this can take the interest away from investments entirely. Thankfully, this doesn’t mean making investments are immediately impossible. This means you should take a different approach to your question. Instead of asking “when should I invest,” you can probably ask, “am I in a position to invest?” Here are some tips:
Are your finances on point?
When we think of “investors,” we think of people “with a lot of money,” and this logic makes sense. However, investors aren’t just people “with money,” they’re people who are smart with their money. And if you want to be on the same track as theirs, that’s well and good. Before you start investing, you’ve got to be wary of your finances first, especially the many elements involved with your financial stability. For instance, try to think of the following points of interest:
- Do you have any outstanding debt? It might help to pay your debt first before you embark on an investing journey. It won’t be beneficial if you have money in stocks when you have debt looming over the horizon. This is especially with credit card debt, or any kind of debt you have with growing interest.
- Do you have an emergency fund? Aside from fixing debt, it helps to at least have an emergency fund set so you’re able to support yourself and your family for a few months in case of emergencies. You don’t know when sudden expenses strike, and it won’t help your investment dreams if you’ll resort to debt whenever this happens. It’s advisable to get an emergency fund that can cover around three to six months’ worth of expenses.
- How much do you usually spend? Try to list down all your expenses, ranging from utilities to rent, from your debt to your miscellaneous expenses. The earlier you get to determine these, the earlier you’ll get to know how much money you have left to either save or invest.
- Do you have a stable income? Another consideration you have to check is your income, as this is the primary source of your investment. What’s the nature of your work and the nature of your finances? How much do you earn, and what’s your income minus taxes? If your owner uses a service like my-estub, you can easily keep track of income you earn over the course of your employment. This can make record keeping of the money you have that much easier.
How fast can you start investing?
One other point you can consider is to check just how soon you can start investing in the first place. This takes a lot of understanding and assessment of your current financial status, and this really depends on what you’ve gained from the previous point. Here are some considerations:
- If you have an immediate source of investment, you should probably start investing right away. This is especially if you have money you don’t necessarily need to save – such as if you have extra money from your paycheck.
- If your company offers a 401(k) match, probably consider this first. A lot of companies offer to “match” a particular investment percentage of your income if you allot it to your retirement plan. For instance, a 3 percent match means the company will invest 3 percent more to your retirement plan if you invest 3 percent of your income to it. This essentially gives you “free money” that goes into investment.
- If you have unsure sources of income, such as if you’re freelancing, consider investing that income. You can even pick part-time clients that can pay you money that you can specifically assign to your investments.
- If you’re a younger professional, look into investing as there’s less risk involved. You can lose a bit of money without sacrificing a lot of your potential retirement income if you invest, especially if you’re a few decades away from retirement age.
What are your plans with the money?
Another point of interest with investments is your goal with the money. Creating an investment portfolio can be done over time, but investing without a plan can put you with more risk. Identifying what you want to do with the money will help you center your financial focus and make better moves when you feel like it’s the right time to invest. Considerations in this case include:
- Are you planning for a short-term investment? These include everything that involves using your money within the next five years or the immediate future. This can include a car, or a short payment for a house. You can consider getting a money market account.
- Are you planning for a long-term investment? These goals include education, a house, or a retirement investment. If you want to tackle a longer investment strategy, you can try stocks and mutual funds. These also include retirement savings account like IRA, 401(k), and other related funds. If you’re planning for an early retirement, try to invest outside a retirement account so you have something to access without penalty, especially if you’re retiring before the retirement age.
How’s your understanding of your investment options?
While you may read articles like these that help explain financial concepts in a simple manner, but actually investing your money is a whole other issue entirely. If this is your first time investing money, you need a good understanding of the stock market.
- For instance, if this is your first time investing your money, you might benefit more from a long-term investment strategy. Investment trends you see that involve trading securities hastily best benefit those with a lot of money to spend, and those that have vast portfolios.
- On a related note, while it’s definitely possible to make money by selling and buying securities and stocks, it does take a lot of effort, time, and understanding of the market to do so. If this is something you want to take, it might make sense to hire a financial planner. Then again, you need to proceed with caution regarding this fact. On that regard…
What’s your take on a financial planner?
Looking at this consideration might make you raise an eyebrow. Hiring a financial planner might make you spend more money, right? Not necessarily. A financial planner or a financial adviser will have a better understanding of your financial goals, and they have the right skill set to offer you options you can take on how to achieve them. Given the fact that finances and businesses are very complicated fields, there’s more than one path to take in achieving your goals. Here are some reminders when hiring a financial planner:
- Don’t just follow their advice haphazardly. If possible, ask for sources and pieces of evidence on their end so you know they’ve researched the options they’re giving you.
- If you’re not sure with the person you’ve hired, or if you find yourself lost, you can ask financial institutions such as banks for a recommendation. With the right financial planner, you’ll be able to find the best ways to invest and save your money to achieve your goals.
When Should You Invest? This Depends On Your Situation
If there’s anything the above tips have told us, it’s that identifying just how much you should invest really depends on your current situation. Knowing exactly how much money you have going around, and how much extra you have doesn’t immediately pinpoint whether to invest immediately. Knowing exactly how much money you have, what your plans with your investments are, and your understanding with the investments scene that determine the success of your plans.