Investing Starts with Taking Stock of Your Financial Situation |
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By: Mika Hamilton Posted: 2006-10-11 23:03:31 |
| “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” - Paul SamuelsonInvesting can be a tricky endeavor but even for the beginner it can be both a financially and emotionally rewarding experience. Before you invest make sure you have protected all your risks. Make sure you have the proper insurance for you and your family.This includes health insurance to cover medical bills from unexpected accidents or illnesses, disability in case you can not work, property insurance, and life insurance. Life insurance is particularly important for your family who count on your income. Insurance is actually an extremely safe place to put your money because it can not be touched if you are sued and found liable.If you have a 401k at your work make sure you are investing in it. Companies will often match the amount of money placed in a 401k. This can be extremely useful in establishing enough money to build an investment portfolio. Mutual fund companies will offer an automatic withdrawal feature for their investors. Money is taken directly, from your pay check or checking account, and placed into your 401k. Remember 401ks are tax deferred.Contributing money to it will decrease the amount of taxes taken out of each pay check and you will not have to pay taxes on the money, put into your 401k, until you use it. In addition, there is a fee associated with removing money from a 401k before you reach the age of 59 and a half. Most companies do offer loans which can be placed against a 401k in emergency situations.The next step in preparing to invest is paying off credit card debt. It is important to pay off credit card debt because it will allow you more security and flexibility in investing. Credit card debt is a money eater and you will not be able to get an investment return which would make up for the debt. Most financial expects suggest that new investors also have a 'back money' fund. New investors should place at least 3 months (and if you can 6 months) worth of living expenses into a high yield money market account.This will help in cases where you may get sick, lose your job, or the stock market falls and you lose big. Having a financial plan is the the last step before investing and the most important step. Make a list of your financial goals, seek out an experienced (and moderately priced) financial advisor and create an investment plan which will help you meet you future financial goals. |
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