Starter Guide to Financial Planning
Here Is What You Need To Do Before You Start Investing
Being in a world with ever-rising inflation rates, you know that you cannot simply rely on your salary only. At the same time, your body can only go to a certain extent when it comes to hard work.
Thus, investing is one way for you to battle the rising rate of inflation.
Understanding Investing
Investing is putting money into a financial instrument, property or even business with expectations of earning a profit. However, it is not all that beautiful and easy.
There are the downsides of investing.
If you want to earn 10% of Return of Investment (ROI), you must be willing to lose 20% as well. Yes, you have to be mentally prepared if things go sour.
You cannot simply expect high returns without taking on high risk.
Thus, the next part of the article will help you prepare for any downsides of investing.
Having Adequate Savings
You should only invest excess money in your income. That at least will give you some leeway if you incurred a loss on your investment.
You perhaps have heard of it before, “Having Adequate Savings“.
But how much really is adequate?
If you have an emergency fund, that is actually the adequate savings you need. Typically, an emergency fund should last you for three to six months.
When it comes to investing, you need to have the end goal in mind. Some perhaps want to accumulate a million dollars for retirement. But when you incur a loss, you may need to change your goal or you may even not reach the goal itself.
Therefore, the savings that you have can help you recover on the loss and direct you back to your financial goal.
Getting Insurance
Straight to the point on this part.
If you do not have insurance, there is a chance you can lose a good amount of your money.
Here is an example.
You invested $100,000 and after 10 years you achieve a good amount of return. But unfortunately, you are diagnosed with cancer plus you do not have insurance.
You need money for the treatment. You also need money for your daily expenses, as you are not able to work. The only source of money you have left is your investment.
You can be awfully reluctant to redeem your investments but at the same time, you need the money to survive. Eventually, you redeem it and all the patience and hard work of 10 years are gone just like that.
Hope that explains the “Getting Insurance” part.
Risk, Return and Safety
In order for you to battle inflation, you can invest. But if you want to be safe from the downfall of investing, you should do the steps above.
Do not fall into the mistakes of not overseeing your shortfall. It is harder to climb out to the hole. And even if you do, are you able to walk back again?
In football, even if you have the best offense, you cannot win any games without any defense. Therefore, you do need to have both. It goes the same with your financial planning.
Hope that this article was useful. Do share it with your family and friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
