Finance, Investing, Life

Before you start investing

If you don’t have the money to invest just yet, here’s some helpful hints to get started.

The best time to invest is… yesterday. That’s because the longer you wait to get started, the more opportunity for future returns you could be giving up.

But it’s not the right advice for you if you don’t have the money to invest just yet. (P.S. – you might not need as much as you think.)

Here’s our guide to get your money on track and start building your financial freedom.

1. Pay off any credit cards

Pay off your credit cards and any other high interest debt like a personal loan. The amount you pay in interest is higher than what you can expect to make investing.

Once you’ve done that, its wise to have 3 (or more) months of living expenses saved up. We call this a ‘rainy day fund‘. Our next handy tip will help you get this underway.

Why you need a rainy day fund

2. Track your money & make a plan

All you need is a high-level plan so that you know what’s coming in, what’s going out, and whether you’ve got anything left over. One helpful rule – and my favourite – is the 50/30/20 rule:

  • 50% of your money in the ‘everyday‘ bucket – your living expenses like rent, food, and other bills.
  • 30% of your money in the ‘fun‘ bucket – expenses like clothes (or shoes in my case), going out, and living life ‘today’.
  • 20% of your money in the ‘freedom‘ bucket – putting some money aside to do whatever you want in the future.

The percentage you allocate to each bucket will depend on factors like your income and expenses as well as your personal goals.

Here’s a simple trick for getting your ‘freedom‘ bucket into shape: set up an automatic direct debit every payday to a separate savings account (that you don’t touch) so some money comes out of your pay automatically.

That way you never get a chance to miss the money. And then keep bumping it up a little bit at a time. Even if it’s $100 a week — every dollar counts.

Here’s some more helpful tips to consider before you start investing.

3. Set some (money) goals

Now it’s time to get clear on your ‘freedom’ financial goals – not for tomorrow or next month, but for a few year’s time.

Do you want to buy a house or apartment? Want to study something new or invest in your education further? Keen to take some time off and travel the world? Or do you want to grow some wealth so you have the freedom to do whatever you want down the track?

Knowing your goals will help define what type of investments are best for you and how long you should invest for.

Learn more about setting goals

4. Plan to invest for at least 3+ years

Once you’ve got your rainy day fund sorted and set your sites on your money goals – you’re ready to start investing. Historically, investing has been more powerful than leaving your money in a savings account.

That’s why we recommend investing for your big, long-term goals, like saving up for a house deposit in a few years, or growing your wealth over time.

Whilst you can invest for as little as a few years, ideally you want to keep your investments for at least 7 years to make the most of compound returns and not worry about stock market fluctuations.

Reading to start investing?

Once you are ready to start investing, or if you want to learn more about how to invest, check out our handy 5 step checklist . Tip: Stockspot can help you get started investing with as little as $2,000. Plus we charge no fees for the first 6 months on investments up to $10,000.

Find out how Stockspot makes it easy to grow your wealth and invest in your future.

Advice & Client Care

Sarah has over 13 years experience in the financial services sector. She has spent most of her career working in financial advisory, operations and administrative roles. She holds a B.Business/BA International Studies and Graduate Diploma in Financial Planning.

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