Prepare for the journey before you set off
1 September 2007
The journey of a thousand miles begins with a single step. So make sure your shoelaces aren’t tied together. If you try and take a run at investments, you are heading for a fall.
Think of your investment journey as a long and potentially arduous expedition. The better prepared you are, the greater your chances of success. Working with a financial adviser is like having your own personal guide who knows the territory and can show you the pathways.
But first you need to do a little preparation of your own. Work out what you can afford to invest by following these simple steps:
- Could you pay off all your credit card debts and other short-term loans? They are almost certainly costing you more than you can hope to recoup from most investments. Doing this is in fact a very good investment of your money. Store cards, in particular, sometimes charge interest rates above 20%. So they are costing you a lot of money.
- Set up a contingency fund – perhaps three months’ salary for example and keep it in the bank where you can get at it in case of emergencies. You never know when you might need to lay your hands on some extra cash.
- Make sure you can cover any unexpected rise in your outgoings too, such as a mortgage rate increase, or expensive car repairs. When borrowing money, leave yourself some head room. After all, you wouldn’t want to lose your house or return that new car.
- If you are married or have a family you may want think about life assurance, so that they’ll be looked after if anything happens to you.
- Don’t forget about saving for your retirement. Pensions are one of the most tax-efficient investments around. See our pension articles in The Basics for just about everything you need to know.
