If you are starting to invest for the first time, then you should invest in only those options, which give high returns with less risk. Sometimes people are ready to take big risks to get higher returns. However, it requires a well thought out strategy.
Investment advisors say that the sooner you start investing, the better, but during this it is important to keep many things in mind. Many investors start investing without any plan. To avoid any kind of loss, you should have a right investment strategy. That’s why people should keep these things in mind before starting investing.
Make a home budget
Before you start investing it is important to know how much your family’s income is. You should also find out how much your family’s expenses are. On this basis you should make your budget. Along with the income of the spouse, write the account of income and expenses from various sources. You can divide it on monthly or quarterly basis.
It is important to understand the spending pattern
It is important to understand your spending pattern along with earning. With this, you can prepare a savings plan to meet your short term and long term financial goals like buying a new car or completing your child’s education. Keep in mind that the golden rule is that you have to first save from your earnings and then use the remaining amount to meet your household expenses.
pay off the loan quickly
If you are paying interest on any of your loans, then your earnings from the investment will become zero in a way. So if you have loans like home loan, car loan in your name, then repay them as soon as possible. Too much debt can put a financial burden on you. Having a healthy credit profile also helps in maintaining a good credit score over the long term. Generally, the total EMI payment should not exceed 45-50 per cent of your salary.
Must buy health and life insurance
Make sure you have adequate health insurance and life insurance cover before you start investing. In the absence of health insurance, you may have to use your investment money in an emergency. In such a situation, you will not be able to achieve your financial goals.
create emergency fund
To make your investment journey easy, make sure to create an emergency fund. Sometimes some such emergency situation arises that it becomes difficult for us to continue the work. Job may also be lost for a few months. It is necessary to be prepared in advance for such a situation. In such emergency situations, if you do not have an emergency fund, then you may have to take a loan. The emergency fund can be used at any time, so invest the emergency fund in a place from where it is easy to withdraw it in case of emergency.
set financial goals
Before starting investing, you must determine your financial goals. You must know what you want to achieve in your life. Based on your financial goals, you should decide how much and where you want to invest. Inflation is also important to keep in mind while setting financial goals. In this way you can achieve your goals.