Investing your money is so important. In fact, a recent report from Money Crashers, found that people with higher incomes tend to invest more money.
Graph courtesy of monecrashers.com
You can be different
Regardless of where your income level falls on the chart above, you can still invest your money. If these 4 things in this blog post take you 2 or 3 months to do, that is fine, but the key is to just start.
Not investing your money for 2 or 3 months will not hurt you. It is better to start investing with the right mindset and the right tools, then to just jump right in and increase your chances of making costly mistakes.
Here are 4 things that you should do before you begin to invest
Thing 1: Mindset. Spend some time thinking about what you think of money and consider how you feel about money. What is your philosophy about money? How does money make you feel? How were you taught about money? Do some reflecting.
How you think about money will dictate your behavior with money. So, do you look down on people that have money, or do you admire people that have money? Do you feel like you don't need very much money, or do you want a lot of money?
Thing 2: Take inventory. The second thing you must do is take inventory of your current situation with your money. Figure your net worth by figuring what are your assets vs your liabilities? After that, figure your income vs your current expenses.
Do a budget for a couple of months so you have a better feel for your money. Write the budget down and start to be as disciplined as possible with your money.
What about your job situation or your business situation? What are the ways you are currently making money to survive and potentially to thrive?
Are you maximizing your opportunities at your job, and through your other sources of income? Are you bringing in enough money to cover your expenses? Or said another way, are you lowering and managing your expenses in accordance with your income?
Again, you are still taking inventory and reflecting here.
Thing 3: Attack your Debt. You have got to be able to pay off your debt and get rid of it. When you pay off your debt you free up money for investing.
Remember this: If you have a Your $100,000 invested, but you have $100,000 in debt, your net worth is still 0. So, the one side of the equation a lot of people do not look at is their debts. You must develop a plan to lower your debts.
Thing 4: Human Resources. Go to HR, do your research on your jobs 401(k) or 403(b), and learn what is your company’s match. Whatever the company match is, your plan should include contributing that amount. It's free money!
Plan to take full advantage of your biggest wealth building tool, which is your income from your job, and do it automatically with automatic withdrawals from your paycheck.
If you are already doing this, perhaps you need to make some changes to your contribution amounts or even where the money is being allocated inside the retirement plan.
Once you have done these 4 things, you are ready to invest.
I know we live in a day and age where everyone wants to start jumping out and investing, but you have to take care of some of those basic things before you start investing.
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BONUS INFO: If you change jobs, be sure never to cash out your money that you have stored in your job’s retirement plan. You will pay penalties. Have that money TRANSFERRED to your new employer’s retirement plan.
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You can do it!