Congratulations!
Finally you have made up your mind to start investing.
This is a big step ahead. You could either be a fresh graduate out of college,start making money and decide to invest. Or you might be someone who is earning for quite some time but now has started saving enough to invest.
Investing this is the most simplest difficult thing to do.
It’s like an ocean with vast endless possibilities. Most drown just by the sheer choices it allows. It allows the possibilities to swim your way to a paradise or be sucked into deep water pestered by demons.
So before you take the plunge here are the 6 things that you do fast.
1. Six months worth of expenses saved in a bank accountsÂ
Before you invest a single paisa in any of your favourite instruments you should have at least six months of your basic expenses saved in a bank account. Ensure this can be retrieved very easily within a day for any emergencies.
Do not let this balance deplete to a lower level. Emergencies can come at the worst time possible and it can completely shake you up if you don’t have this strong foundation.
This is that strong foundation that your future financial mansion will be built on.
2. If you have dependents , have sufficient life insurance.Â
If you are the signal earner in your family and you have dependents, having life insurance is a must.I think you would know that already because you would already have some of the other LIC agents already at your door.
Best life insurance is a simple one. Just go for a simple term life insurance at the maximum possible cover you can afford. This will keep your mind at peace and keep your family protected from an uncertain event.
3. Take a good Health insurance cover.
Lot of companies provide health insurance for employees but do not depend entirely on them. The cover may not be adequate as most companies do not offer over five lakh rupees.
Secondly ensure health insurance is entirely dependent on your employment status. The moment you switch jobs, take sabbatical or worse laid off you will not have health cover. You are exposing yourself to a big financial risk.
Take a Family floater health insurance with a health cover of at least 15 to 20 lakhs Rupees. Considering the healthcare costs are increasing day by day insurance cover should be sufficient enough for the next 15 to 20 years. Keep upgrading the cover amount as required.
4. Come out of debt.
Get rid of the personal loan you took to buy a ridiculously expensive phone!
Have you ever seen a sprinter or a marathon runner running a race carrying weights. No because it’s stupid.
If you have outstanding loans for which you are paying higher interest there is no point of investing money. Get rid of your debt first and then start thinking about investment.
5. You have basic understanding of Financial products
Financial world is a very murky place. I am a postgraduate in finance and still it took me almost a decade to have a decent understanding of how to invest my money.
There has been a lot of trial and error, I have lost money on wrong investment products but with time I have learnt what is right and what is wrong for me.
The best way is to read books and do some background research before you start your investments. There is a lot of content available on YouTube which you can search and know about different financial instruments that are available for investment.
Without basic knowledge you will be taken for a ride by some insurance agent ,your banker or your relative who will sell you products not in your best interest.
6. Have investing goalsÂ
Once you have a strong foundation, next step is to decide what is it that you want out of the money that you are investing.
- – Is it that you want to retire early
- – You want to save money for your kids’ education.
- – You want to go on a exotic vacation.
- – Want enough money to retire.
- – You want thrill of investing and making money
The way you will invest will entirely depend on the goals that you are trying to reach. Without a goal you will end up investing in wrong financial products.
All of these are important steps and you cannot skip them. It’s really a strong foundation on which you can be assured that any emergencies or uncertain events will not shake your financials.
