8 Things to Do Before You Invest Your Money

1. Create and live by a monthly household budget. Be sure that your budget is realistic. Write down each of your expenses individually and use some software that you can record your budget on and then plug in the actual costs as they happen so that you can adjust if need be until you are using a realistic budget.

2. Build a nest egg for six months of expenses. Anytime you talk to a financial planner; they will always tell you to have at least six months of your expenses saved and set aside for emergencies. This way, if something like a job loss or illness occurs, you will have six months to recover from either.

3. Decide whether you will use a broker. I have mixed emotions about this one. The truth of the matter is if you use a broker, you are giving up a portion of what you make. I think the best advice here is to use a broker, maybe until you have gained enough knowledge to handle your investments on your own.

4. Research the market, Stocks versus Bonds versus Mutual funds. There is plenty of information on the internet. There are some excellent books out on the subject. Learn as much from your broker as you can. Do not be shy; ask questions. Find a friend who might be interested in investing as well. Learn together; it makes it more fun. I know ladies who have formed an investment group together. They each do their research and then share the information with the group. Then the group votes on which investment they will make and how much.

5. Decide what level of risk you will accept. The risk level is a personal thing. Obviously, in the market times, we have just come through everyone had some chance, but those who stayed in or decide to get back in soon will make money and have good returns. In the end, it will all be worth it. As for your level of risk, typically, as a rule, the higher the level of risk, the higher the level of potential return, but you must be prepared to lose it all because it can happen. I recommend that you read this chapter carefully in whatever investment book you decide on.

6. Decide what level of return you are looking for. Performances are a funny thing. Some people say if you can maintain production of 8%, you are doing beautiful other people look for much higher returns. This, of course, is often tied to the risk level, so again, this is a personal decision. I do know that Donald Trump would probably not accept an 8% return. There are ways to improve your returns of which I can help you with, but I will save that for another time.

7. Decide on a monthly amount you would like to invest in. You did the preliminary work for this on #1 above when you set up your budget, so you should have a figure on what you would have leftover every month. Now you want to massage the budget as you go and squeeze as much out of it as you can to add to your investments. Start small and work your way up. The idea is to get you to a point where your money is working for you instead of the other way around. When this begins to happen, you will not mind squeezing your budget a little harder because the growth in your invested funds will make you want to.

8. Acquire at least a basic understanding of the market and add to your knowledge on a weekly planned basis. In #4 above, we covered whether to have a broker or not. The idea here in #8 is to add to your knowledge each week. This way, it is not so overwhelming. Ultimately your goal should be to do it on your own.

Once you have your monthly household budget up and running, you can build a nest egg for six months of expenses to put away in a secure account with growth potential. While you are accomplishing these two things, you could be researching the market and learning as much as you can, thus reaching a level of comfort to decide broker or no broker and risk and return acceptability. Accomplishing all of this will most certainly put you on the right road to becoming wealthy. The key is to stay on track and not let some additional liability derail your plans.

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