Deciding to invest your money can have a considerable impact on your financial future. There are many ways to invest, from starting your own small business to creating a stock portfolio. However, there are also many other factors that can affect your choices and how you assess the risks involved. Making a pre-investment checklist can help you make informed choices about your options and whether you are truly ready to start investing.
1. Decide What Interests You
Deciding where to invest your money and why can be one of the most important choices you will make before you begin, so putting this factor at the top of your checklist is probably a good idea. Consider what has always interested you about investing and what always first came to mind. Perhaps you have always wanted to put your money into real estate or back a company because you believe in their products.
Give yourself plenty of time to decide, as jumping into an investment on a whim can have disastrous consequences. If you are unsure about the best way to choose, reviewing some beginner’s books and browsing objective, informative websites about investing may help you feel more confident about starting your first venture.
2. Review Your Current Debt
Most Americans have some type of debt, whether it stems from credit card usage, student loans, or a home mortgage. While debt does not preclude the possibility of being able to invest, understanding and managing your debt may lower the risk, especially if you plan to venture into opportunities that may lose value.
One of the most effective ways to review your current debt is by ordering a credit report and checking your credit score. You can obtain a free copy of your report annually from any of the three main reporting companies, and you may be able to access your credit score through your credit card lender. Once you have this information in hand, use to it revise your budget and make cuts where you can to amass more money for investment purposes.
3. Be Honest With Yourself About Spending Habits
Your current spending habits can affect how you invest, so it is important to include having a frank discussion with yourself concerning this when you make your checklist. Most people who manage to balance a budget from paycheck to paycheck likely overspend on the items and activities they enjoy most, but when you start handing over your credit card to pay for them, it is time to refocus.
When you think about how you spend, focus on the time you spend planning on purchases. For example, do you clean out your fridge and double-check your pantry before you grocery shop, or do you buy items on a whim? Curbing impulsive spending habits can prevent wasted money later on, as you will likely make better market choices once you start to invest.
4. Set a Variety of Goals
Most investors have a set of goals in mind for each of their investments, and setting such goals can help you decide what you want most out of this experience aside from making a profit. For example, if you are going to delve into the world of foreign currency exchange, is your goal to make connections with other investors outside of your country or become an expert in Forex currency trading? No matter your goals, setting them down in your checklist can help you form an effective plan for reaching them.
If you do plan to invest in foreign currency trade, then it might be a good idea to add finding a broker to your checklist. Fx Brokers accepting US traders are not too difficult to find, and you will likely need to work with one if you hope to enter this market.
Investing can be a slippery slope if attempt it unprepared. Creating a pre-investment checklist may help you gain focus and insight regarding your goals and desires before you begin.