Before investing your money
By Randell Tiongson on November 12th, 2014
A lot of people have always asked me about investing – where to put their money, how much to invest, do they buy stocks or mutual funds, etc. They are all great questions and those are important issues to address. However, before even thinking about putting your money somewhere, there are a few things that you need to take care of first:
1) Money Management – proper management of your finances is the foundation of your quest for wealth. If you are like most of us, your money doesn’t come in just one shot – they come in and go regularly and your investments will do well when you can add to those investments pretty regularly. You can only keep on adding to your investments if you know how to save properly… and you can only save properly if you know how to spend properly. Create and stick to your budget, as that will be your most important weapon in building your wealth.
2) Emergency fund – I cannot emphasize enough the importance of building a buffer fund before investing. Investments are volatile, well at least the good ones are and there is always a danger that when you liquidate your investment, it may have not earned yet or worse, its lower than its original amount. The buffer fund will allow you to keep your investment funds untouched since you have another fund to dip your hands into when emergency strikes. 3 to 6 months worth of expenses is a good emergency buffer fund.
3) Investment objectives & time frame – what are you investing for? Many people invest without really know why they are investing in the first place. Knowing your objectives and time frames will allow you to match the right investment instruments that will be best for you.
4) Risk tolerance – it is good to determine your risk appetite before jumping into any investment. A lot of people invest money into risky instruments and yet they are not prepared to handle investment risks which causes a lot of frustration that leads to a lot of stress. Never invest without knowing the risks.
5) Time – think long-term. There are no short-cuts to wealth and you need to be patient in building your wealth over time. Do not take short cuts and do not be in a hurry as those actions can cause you to make a lot of financial mistakes.
Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty. – Proverbs 21:5, NLT
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Hi Mr. Randell, I first saw you in two interviews in ANC from youtube. I recently become so much interested in matters about finances. I just wish my interest on this topic caught me earlier in life so that I could have made a wise financial decisions and took a better path. You see, when I was 24 I took a VUL which is expensive for me at that time. I regularly contribute in Pag-ibig 1&2 and they are really higher than the minimum. My SSS is also on the maximum. However, what I failed to do which is supposed to be the basic thing before jumping on the investment pool is to secure my emergency fund. I do not have the emergency fund right now but I will start to build this month until I reach my goal of 6 months worth of household expenses. Along side that, I plan to open on April 2015 a UITF and a stock market account.
This is all because of the chance to see a youtube ANC video. Thank you and may more people be inspired by you.
God bless you bro, baby steps will bring you to big dreams!