Nowadays everyone is talking about investment. Thanks to the various cryptocurrencies and social media where folks talk about ‘do investment in such a cryptocurrency and you will be a millionaire in the next few years etc. and people get excited by listening to such kinds of words. Well, who won’t be excited if someone told you that by investing a little amount of money you can be a millionaire. They also quote names of some big investors in the world like Warren Buffet, Peter Lynch, etc to validate their point. They claim that you will easily get a 30-50% return in less time. These statements on the one hand look great but if you look closer, you will find that those people have some hidden agenda to sell you something. Well, I’m not against investment but a great fan of investing. But you should never invest by taking their advice. Would you take the advice of medicine from a farmer or a doctor, would you take the advice of agriculture from a doctor or farmer? Of course, you will seek that later. Then why in your investment decision do you seek the advice of the people who rarely do invest. They are just the salesmen.
The first thing to do before investing
I was introduced to the world of the stock market in 2015 and since then I read a lot of books, did various courses. But something was missing in that knowledge. The puzzle was not solved until 2021 when I was introduced to personal finance. That was an Aha moment for me. So I want to share the same thing with you.
We jump straight into the investment without even knowing ourselves. Here the process which can help you to know yourself is personal finance. Without knowing about your personal finances can give you disastrous results from investing. It is like going into a war without knowing how many weapons you have or not.
You may at this point think ‘Oh no! not again a lot to learn.’ But basically, you can learn personal finance in just a few minutes or hours. But applying the knowledge in real life is a real task to do.
Few things everyone must do before investing in any asset class like stock, bonds, mutual funds, etc.
1. Know your expenses:
Most people don’t know what their monthly expenses are. They just spent money from their salary or savings without recording them. So from today note every single penny you spent on anything. It doesn’t matter how insignificant that amount may be, like $1 or $1 million. Just note them in a diary or you can use excel to record your daily expenses. This one thing may take some time to become your habit but don’t ignore the very first thing of recording your expenses.
I use google sheet to record my expenses and at the end of the month, I just review my expenses to have detailed information about where most of the income is going so that I can take wise action on my expenses.
I’m providing the same sheet which you can use to know your expenses. One benefit of the google sheet is that you can access the sheet anywhere with any device or on multiple devices by just signing in to your Gmail account.
2. Take Insurance:
Another thing which is most important in life is that you must take at least two insurances- Term insurance and Health insurance. So that you and your family don’t have to suffer from an emergency medical situation or financial crisis after your death, who is the bread earner of the family. You may get angry by reading about death but you can’t escape from the truth. Face the truth that life is uncertain but death is certain. No one here is immortal, everyone has to die sooner or later. So, why not prepare for a better life for your loved ones when you won’t be here to take care of them. That’s why to act early and buy these two most important things in your life. But please don’t mix insurance with your investment. Keep them separate and don’t listen to your broker whose work is to sell different products.
I will explain more about insurance in another article.
3. Pay the loan or at least reduce the EMI:
Most of our income is spent on the EMI which is really a headache for us. So the next advice will be to pay the loan completely or if you can’t pay the debt fully. At Least reduce the EMI by paying more of the principal regularly. Being debt-free is itself a boon. You must feel the pleasure and happiness of getting debt-free. “As Lord Budhha somewhere in the Dhammapada announces being debt-free a source of happiness”. So, be debt-free and then enjoy the next step which is an investment.
If you don’t follow the steps and directly jump into the world of investment, your chances of success are much less than if you start your journey with a proper foundation built on these 3 pillars. You will be like that soldier who before going to a war analyzes himself and also the enemy. That soldier will be fearless because he knows in his heart that he has done the basic preparation to win the war. His chances of success are much greater than other soldiers who didn’t do the preparation.
I hope you liked the article and will take action in your life. We will talk more about investment and personal finance in our upcoming articles. So kindly bookmark this website for such more informational life-changing articles. Post your queries in the comments, thanks.
