Investing is when you invest in an asset, e.g. a share, so that hopefully over time, the share grows and you make money. It is important to note that there is no guarantee that you will make money or profit from your investments.
Investing means that you decide to not spend your money on things that give instant gratification – like a new outfit or lounge set, or even a night out or make-up. Instead, you put your financial future before your current wants by buying medium-long term assets.
6 things to consider before you invest:
Income stream – evaluating and understanding your income stream will help to inform your investment decisions such as when or what to invest in.
What is your current financial position – do you still have a lot of debt that you need to pay off? Do you have some savings/extra cash that you can use to invest? You can decide if your money still needs to be used elsewhere or if you have the funds to invest now.
Standard of living – what do you need to have a comfortable and enjoyable life including personal belongings, holidays, entertainment and luxury items? Are you comfortable now? Are you able to budget? Once you have established the money that is needed for the life you want you can then decide how much money you need for investing.
Personal control – how much control do you like to have in managing your finances? Would you rather let someone do it for you or do you like to know what is happening with your money?
Insurance – do you have enough insurance against risks to your property, possessions, income and well-being? This helps you understand if you can use your extra money for investing or if you still need to take care of these responsibilities.
Need for financial independence – do you have a strong need to not rely on a pension fund? Investing may be an option for you to become financially independent.