Investments, like a sturdy foundation, underpins financial liberty and security. Here are six essential thumb rules that can guide anyone aiming to build a healthy investment habit.
Goal-based Investing
A goal-based investing approach such as saving money for a child’s education or marriage or buying a house can help your savings and investment to get a more focused direction and structure than random transactions. Think of short-term, medium-term and long-term investments.
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” — Robert Kiyosaki
Repayment of loans
Paying off high-interest debt is likely to provide a better return on your money than almost any investment. For instance, carrying a credit card balance from month to month isn’t generally the smartest move.
“If you are born poor, its not your mistake but if you die poor, it is definitely your mistake.” – Bill Gates
Buying Insurance
While no one can predict or foresee what lies ahead, one can always be prepared for it. This is where insurance comes to one’s rescue. Investing in life insurance, health insurance, home insurance, vehicle insurance provides one with the ultimate peace of mind and financial shield against uncertainties.
“A man who dies without life insurance should come back and see the mess he created.” – Will Rogers
Curb unnecessary spending
People get into financial trouble through unnecessary spending that drags their budget down. Start looking at your spending habits to cut out unnecessary expenditure and stick to a super-strict budget. Once you have done that you will find that you have more disposable income to pay off debts or make financial investments
“Beware of little expenses. A small leak will sink a great ship.” – Benjamin Franklin
Build an emergency fund
Emergency funds offer an invaluable buffer against life’s uncertainties. Start building an emergency fund when you’re not in the middle of an emergency. If you want to invest these funds so that they earn money, it’s advisable to ensure that you can access them quickly and easily.
“Save for a rainy day.” – Aesop
Don’t rush to invest your money
Don’t rush into investments that don’t align with your risk-taking appetite and goals. Take your time, do the necessary research and analysis, before making an investment decision. Also, it’s really important to ensure you only invest what you can afford to.
“An investment in knowledge pays the best interest.” — Benjamin Franklin
