Investing is a major part of building wealth and achieving a bulletproof life that is secure from failure and setbacks. Investing allows you to live your dream life. But there are some things you need to do before investing. A well-planned investment process not only frees you of any investment worries in the near or distant future but it also helps you attain those investment goals.

Build an Emergency Fund.

Your emergency pot is the savings that will be there for you when you have emergencies or when something in life happens that you are not expecting or planning for. Like when your boiler packs up or when your car develops a fault. These emergencies need to be taken care of, and that is where your emergency fund comes in.

If you start investing without an emergency fund, you may get into debt when emergencies happen. You may also find yourself using up your savings or running a helter-skelter looking for where to borrow money.

Another emergency that can happen is losing your job; this is an emergency you do not plan, but when it happens, you need to have funds to deal with it.

How much should you have in your emergency fund? Some say six months, while Dave Ramsey says a monthly income at the minimum. However, You can save up to six months of your income, but you need to start with three months. An emergency fund is one thing you should have before you start investing at all.

Pay Off High-Interest Debt.

When you invest, you aim to make returns. High investments pay between 1 -200% of your money, but a lot of investments usually pay less than 20% in the first year.
Some even pay as low as 3 to 5% in the first year of investing before compound interest kicks; that is why you need to pay off high-interest debt first.

Any debt with an interest rate of over 10% per annum is a high-interest debt and would take more from you than any investment would give you that year. So, focus on paying off this debt first.

Besides, what is the point of investing if your high-interest debt is going to take more than your interest returns?

Start Paying Other Debts.

I am not about living a debt-full life but a debt-free life. Arrange a process for paying off all other debt; set up a monthly payment to your lenders, negotiate your payment options, and arrange a payment plan.

You also need to be aware of your pay-off date, that is when you are likely to be debt-free from each particular debt you have.

Put the Right Insurance in Place.

Many of us ignore insurance because we do not believe in it or simply do not care about it. We think it does not matter, while in fact, it does.

Life insurance is one of the most important insurances to get, especially if you have children. You do not want them hanging around without any ray of hope if something suddenly happens to you.

Another insurance I usually advise people to have is home insurance, especially for home property owners. If anything happens to your property, you can rely on your insurance. Some home insurance even has boiler coverage. If your house gets burgled your home insurance should cover it, depending on your insurance plan.

Health insurance is the third insurance that I always preach about. In the UK, NHS is fantastic because it gets things done for us; you can see your GP anytime and can check into the hospital anytime.

Having health insurance is sometimes the difference between an early diagnosis and a late diagnosis of a life-threatening condition.

The NHS is quite burdened because of the queues and waiting time, so I advise that you go the extra step of getting health insurance, especially if you are over forty.

Make Retirement Plans.

Do you have a pension? Have you put one in place? Are you part of your organization’s pension program? If the answer to these questions is a no, you need to get proactive about your retirement.

The truth is that because of medical advancement, a lot of us are going to be around for a very long time. So when we retire at age 60 or 65 without any financial plan, what would you fall back on? How will you survive beyond that age?

If you do not have a plan, see how you can join your organization’s pension program. If you are self-employed, get private pensions. In the UK, we have the self-invested pension program (SIPP), which you can join through investment platforms.

Know Your Cash Flow.

You need to know how much money you earn monthly/weekly and how much of that income is spent on your bills, expenses, and debt. To know your cash flow, you need to have a budget. Start budgeting your money, tracking your expenses, and understanding your cash flow; this helps you know how much you have to invest.

Investing is not a one-off thing but one you need to do consistently and repeatedly, which requires you to know your cash flow. Understanding your cash flow gives you an idea of how much you can spare monthly for investment?

Know Your Investment Goals.

You need to ask yourself why you want to invest, how long you want to invest, and what you expect to get out of the investment. It is very important to sit down with yourself and have this conversation so you can get the answer to these questions. Understanding what your investment goals are is one thing you should do before investing.

Educate Yourself.

Before you start investing, you need to educate yourself. Do your research. Know the investment instrument and platforms available. Read about the fees, tax implications, and pros and cons.

You can educate yourself by watching videos like those on my Youtube channel, reading personal finance books, or attending one-on-one coaching sessions with certified finance coaches like myself.

Till next time,

Love,

Ronke.