Putting money into the stock market is one of the best ways to build long-term wealth.
1. Why do you want to invest?
Before you open an account, financial experts say you need to think about the ultimate goal for this money.
Trading staff on the New York Stock Exchange.
If you’re 25 and want to save for retirement, focusing on stocks makes sense.
But if you and your spouse want to buy a house in the next five years, don’t put all your money into stocks.
2. How much does your emergency fund have?
The next question to answer is whether you have enough cash on hand to invest?
The goal is that if there is a problem, you will still have money on hand to take care of it, instead of withdrawing money from your investment account.
Ideally, you should reserve 3 – 6 months of living expenses.
3. What is your monthly budget?
To invest continuously, financial experts recommend that you need to know your cash flow in and out each month.
You can use spending tracking and planning tools to do this, or list major expenses that will appear in the near future ahead of time, to avoid them affecting your investment plan.
`At the beginning of the year, I look at the calendar and write down the big expenses that I will have to make throughout the year,` said Christina Empedocles – founder of Insight Personal Finance.
No matter how you do it, the ultimate goal is that you know how much free money you have left to invest.
After answering these 3 questions, you are completely in a good financial situation to step into the investment field.