8 Things To Check Before You Invest

One of the most common inquiries I get is about how to start investing. And knowing this, I’m glad that more and more people are looking for opportunities to grow their money.

There's definitely a lot to learn when it comes to investments. But aside from that, there are things that anyone must have to ensure that they have a solid foundation before investing.

And in this article, I'll be sharing with you this simple checklist to identify whether or not you're now prepared to invest.

1. Adopt the Right Wealth Mindset

Your wealth mindset is about your personal beliefs when it comes to money. Based on how you were exposed to it growing up, this is how you’ll view and handle your finances as well. If you’re worried about this, don’t worry, as it is something you can slowly improve over time.

In investing, the most essential belief anyone must have is that it will definitely take time and patience. Keep in mind that you’re leveraging time to grow your money. And it is not an easy way to get rich quickly. This can vary from a year to even up to 20 years, depending on your goals and objectives.

For some guidance, you can ask yourself the following questions:

• Do I think I deserve to be rich?
• Do I prioritize financial education and continuously seek ways to improve my financial literacy?
• Am I comfortable discussing money matters openly and seeking financial advice when needed?
• Do I avoid comparing myself to others based on their wealth or material possessions?
• Do I view money as a tool for achieving my goals?

Remember, your mindset toward money will greatly impact your investments. Be honest with yourself, and don’t rush when you’re still on your way to improving it.

2. Get a Reliable Source of Income

Investing can only multiply what you have as it requires capital, which should be outside of your expenses and savings. The amount of money you put in will affect the amount of money you’ll get in the future.

If you think your income is not enough, the first thing to do is increase it. One way to do this is by finding a part-time or higher-paying job. You can also learn a new skill to get promoted or even start a physical or online business. Never invest if you’re income is just enough for your daily needs or if you’ll need to borrow from others just to get started.

3. Design a Spending Plan You Can Consistently Follow

Being able to follow your conscious spending plan is a prerequisite before investing. Knowing that you can stick to it means you have discipline when it comes to your finances. And you won’t be withdrawing the money you’ve invested just because of mindless spending.

If you need help with this, as a start, what you can do is take note of your monthly expenses like food, rent, and utilities. This will give you insight into your cash flow, which you can then base your spending plan on. If you’re having a hard time sticking with your spending plan, divide your income right away once you receive it.

4. Set Boundaries when Helping Others

Taking care of family or relatives financially is a common thing in Asian culture. But in order to take care of others, you must ensure that you’re taking care of yourself first.

If it can’t be helped, the best way to go about this is to identify the minimum amount they need. Of course, the priority should still be you. So only provide the amount they need if it’s something you can give. I understand that it’s not easy, but you should know your limits and set your boundaries.

5. Create a Plan for Paying Off Debts

In this case, I’m only referring to assets with loans that have low volatility and can possibly generate income, like properties and annuities. This is the kind of debt I’ll agree to not pay off first before you invest.

If you still have consumer debts, you can start by paying off the smallest ones first. Include it in your spending plan, and make sure to set it aside when you get your income.

6. Ensure You Have an Emergency Fund

Life is unpredictable, and sometimes there are things we never see coming. This can be as simple as needing drainage repairs or as big as losing your source of income. While we don’t want anything like this to happen, it’s still essential that we're financially prepared for it.

In order to do so, have savings worth 3 to 6 times your expenses. Make sure to put it in a place or a bank where you can easily get it if needed. Preferably, find a trusted bank that has a savings account with high-paying interest rates.

7. Be Protected with Appropriate Insurance Coverage

While this is not really required, you can grow your money in peace if you have the right insurance coverage. This can protect your investment portfolio from any unexpected major events, like having a critical illness, getting involved in a huge accident, or having your house catch fire.

Things like these are something your emergency funds can’t cover. It’s in your best interest to have the right protection before you invest, so if the need arises, you won’t have to use the money you’ve invested. There are different types of protection, but if you want to learn more about life insurance, you can check out this previous article I wrote.

8. Understand Your Goals Clearly

Your goals will serve as your ultimate guide when it comes to your investments. This will determine the approximate amount you need, the time frame, and the type of investment you’ll put your money into.

This can vary from saving for your child’s college, buying your own home, or preparing for retirement. A simple question to help you with this is: What do you want to achieve in 1 to 3 years? 3 to 10 years? 10 years or more?

And that’s it!

Let me know how you did. Have you checked off this checklist? Or do you feel like there is one or more missing? In case it’s the latter, don’t worry, as it’s more important to work on it first than to just invest unprepared. Even if it takes time, know that you’re on the right path. And I believe that you can reach your life goals and achieve financial abundance in the future.

As always, if you have any questions or concerns, feel free to reach out, as I would love to help. You can send me a message here or book a call here.