It’s important to know what you want to accomplish with your investments before you actually invest. Learn how to set your financial goals, get a handle on your cash flow, control spending, manage debt, and get on the path to saving and investing.
Set Your Financial Goals
Just as in other aspects of your life, setting financial goals is a tried-and-true way to reach those goals.
These are essential four steps to creating a strategy for meeting your goals that will work for just about every person and situation:
- Identify your most important short-, medium- and long-term financial goals.
- Estimate how much each of your goals will likely cost.
- Set up separate savings or investment accounts for each of your major goals.
- Choose investments suited to meeting each of your goals based on your time frame and your tolerance for risk.
Before you can choose investments to meet a particular goal, you need to have an idea of what the goal will cost and your time frame for meeting the goal.
Know Your Net Worth
Creating a net worth statement, and updating it each year, will help you monitor your financial progress and meet financial goals.
Control Your Spending
Calculating your monthly cash flow will help you evaluate your present financial status, so you know where you stand financially as you prepare to invest.
Manage Your Debt
As you prepare to invest, take stock of your current debts and learn how to manage them effectively.
Understand Your Credit Score
Each individual has his or her own credit score but many people do not know about the credit scoring system and how it impacts them.
Start an Emergency Fund
If something unexpected happens to you, having the money you need to pay your bills will help to keep you out of debt.