10 signs you’re ready to start investing

ready to invest

While many young people nowadays have already hot footed their way into the stock and property markets, for the majority, ‘investing’ is still a daunting word.

If you’re interested in growing their wealth, there are a number of ways you can work out if redirecting a portion of your income or savings into a financial growth vehicle is something that fits your current lifestyle and position.

So, here are 10 signs you’re ready to start investing.

You’re eighteen years old or over.

Sorry kids, you have to be an adult to buy and sell stocks in your own name. You parents, however, can make investments in your name, where they act as the ‘guardian’.

You’re earning more than it costs to live.

One of the most important boxes to tick before investing is being confident that you’re making enough money to cover expenses, and having the ability to save and contribute towards your investment each month.

You don’t have any outstanding high-interest debt.

It doesn’t make sense to invest if you’re still paying off credit card debts. Credit card debt typically has very high interest rates, which is likely to be higher than the long term return from your investments. So nip those nasty high interest debts in the bud before thinking about investing.

You’ve stopped poor personal spending habits.

The difference between what you earn and what you spend on expenses each month is the amount you have left over in savings, which you could consider investing.

So if you’re still spending $40 a week on iced macchiatos, there’s still some creases to iron out in your personal spending that could make investing even more rewarding for you in the long term.

See: 10 things to cut from your budget

You have an emergency savings fund.

Sometimes life throws unexpected hurdles at you and there’s absolutely nothing you can do about it, except to be financially prepared. Before you start investing, it’s important to ensure you have an emergency fund topped up with cash that can save you if you lose your job or are slapped with a hefty and unexpected cost.

One of the best things you can do is set up an automatic transfer every pay period that contributes a small amount regularly.

When that account builds up to an amount you are comfortable with for your emergency savings pool, you should consider investing any extra funds. Savings account interest rates aren’t as good as you think they are, once you take inflation and taxes into account.

Calculate how much you should save in your emergency fund here.

You have long-term financial goals in mind.

Before you start investing your money in the stock or property market, it’s important to know why you’re doing it. For example, if you want to use your money to buy a house in a year’s time, investing in the stock market may not be the right strategy for you.

Investing is best done with a long term view and generally you should have a time frame of at least three years or longer. If you need your money in the short term, you may not have enough time for the stock market to recover from a dip, or, in the worst case scenario, a major drop such as the global financial crisis.

Your partner is on board with the idea.

If you’re married, chances are your finances are to some degree combined with your spouse’s, which means you both need to be on the same page with long-term financial goals.

Between the two of you, you should have at some point covered the following points before investing:

  • What you’re saving or investing for and why
  • What you’re going to do to achieve it
  • And whether or not you both agree on the above points

You understand the market.

All investments come with an element of risk. There are ways of managing this risk, such as through proper diversification, but you can not fully eliminate it. Understanding how much risk you are willing to take and what return you can expect for the risk is very important. 

You understand your options.

Before you invest, it’s important to understand your different options.

Do you know how stocks, bonds, mutual funds, exchange-traded funds, index funds, precious metals and real estate operate in the investment market?  No? Then you’ve got some researching to do and you should consider whether you do it yourself or seek professional advice. 

You have a reliable bank that can handle auto transfers & online banking.

This is a given for almost all banks now, but it’s good to double-check that your bank is well equipped to handle these things with ease so your investment plan can basically run on autopilot.

If you’ve ticked all of these boxes, then congratulations – you’re ready to grow your money !

Start by calculating your risk profile for free –  it’ll even provide you with your own free customised investment plan.

Subscribe to our mailing list below to get the latest Australian financial and investment tips sent straight to your inbox.