When to start

Here’s the caveat. It’s essential to start investing at the right time for you. That doesn’t just mean ASAP — it also means when you’re financially prepared. A strong financial foundation is key to building a successful investing journey.

But what does this look like?

The importance of being financially prepared

Think of starting your investing journey like preparing for a marathon. You wouldn’t just jump up from your couch one day and start running 26.2 miles, would you? No, you’d prepare.

You’d train, eat right, get the right gear. 🏋🏼‍♀️ Similarly, investing requires preparation. You need to be financially fit and ready. But how do you do that?

Emergency savings - Your safety net

Imagine you’re walking on a tightrope. Below you, there’s a safety net, ready to catch you if you lose your balance. That’s what an emergency fund is - it’s your financial safety net.

An emergency fund is money you set aside for life’s unexpected twists and turns - job loss, medical emergencies 🏥 car repairs, etc. Most financial experts recommend having enough to cover 3-6 months’ worth of living expenses. 

Without this safety net, you might be tempted to dip into your investments in times of need, which can disrupt your investment plans.

So, before you start your investing journey, it’s worth making sure you have a fully funded emergency savings account. It’s not as exciting as buying your first shares, but trust us, your future self will thank you. 🙏🏼

Debt management - Clearing the financial clutter

Now, let’s talk about another big part of financial fitness - managing your debts. Remember, not all debts are created equal. A mortgage might be a necessary debt, while high-interest credit card debt can be a troublesome drain on your finances. 💳
Think of high-interest debt like a hole in your pocket. You’re trying to fill your pocket (building wealth) while your hard-earned money keeps leaking out (paying interest). Sounds frustrating, right?

That’s why it’s crucial to clear this kind of debt before starting your investing journey.

Remember our friend Alice from the previous chapter? Let’s say she has £1,000 in credit card debt with an annual interest rate of 19%. If she only makes the minimum payment each month, it will take her several years to pay off the debt, and she’ll end up paying more than double the original amount in interest!

So, as painful as it might be, it’s best to tackle these high-interest debts head-on before you start investing. 💸

Budgeting skills - Your financial compass

Budgeting might sound like a boring, grown-up thing to do, but it’s a crucial skill to master 🥋 before you start investing.

It’s about knowing where your money is going, understanding your income and expenses, and ensuring you have some leftover (surplus) to put towards your investments.

Imagine you’re going on a road trip. Your budget is like your GPS. It guides you, helps you avoid roadblocks (unforeseen expenses), and ensures you reach your destination (financial goals). ⛰️

 

A clear goal - Your investment beacon

Last, but certainly not least, is having a clear investment goal. Are you investing for retirement? A dream home? Your children’s education? Or just to grow wealth?

Knowing why you’re investing is critical. It guides your investment decisions, determines your risk tolerance, and helps keep you focused when the market gets a bit rocky (which it inevitably will at some point as markets move not only up but also down). 🎯 

Imagine you’re climbing a mountain. Your goal is the peak. It’s what keeps you going when the climb gets tough. Similarly, your investment goal keeps you on track when your journey becomes challenging.

 

Conclusion

So there you have it, the true starting point of your investment journey. It’s not about picking the right stocks or timing the market. It’s about being financially prepared and starting early. And now, you’re ready to lace up those shoes, step up to the starting line, and begin the race.

Next, we discuss how you can prepare for your investing journey!

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Remember, with all investing, your capital is at risk.