The very word ‘investing’ can throw the most savvy person into a cold sweat, with the thought of complex and time consuming funds, stock market purchases and complex financial products often first springing to mind.
Certainly there has long been a certain mystique attached to investing – the idea that it’s an activity best left to the experts, the rich, the professional management funds, or those with vast tracts of spare time and resources available.
However, this happily isn’t the case. Quite simply, investing means putting away your money for a future goal. It tends to be on a longer term basis and different risk levels and products are available.
You can invest in almost anything – stocks, shares, bonds, property, gilts, gold, mining, antiques, wine, and collectibles – every month a new opportunity emerges.
Sometimes large sums are required, but in other cases – very small amounts can lead to valuable returns and are a great way to get started and build your investing confidence.
As a first step, invest in credit score monitoring, which costs just a few dollars. You can buy it online and check all your spending history to date including credit cards, loans, mortgages and other credit forms – and keep alerted for any ID fraud.
The large credit agencies including Equifax and Experian also offer credit monitoring services for a small monthly subscription, which you can sign up to and monitor your spending, credit record and in and outgoings.
Get into the habit of tracking your spend. Set a budget and stick to it. By cutting out unnecessary spending, you’ll likely find a pot of available cash each month to invest.
Focus first on clearing debts from loans and credit cards and prevent yourself from taking out more credit or loans. Once you’re debt free – or have nearly paid off loans – then the fun begins.
Look at tax efficient savings to begin with. The government allows tax free savings vehicles every year, up to a limit. Find the one with the best interest rate and the terms that suit you.
Start building up your savings until you have a safety net. This will prevent you needing to take out loans or using your credit card in emergencies.
A safety net should be between 3 to 6 months of your earnings and allow you a cushion should you fall unemployed or your circumstances change. With that buffer in place, you need not fear the short term impact of a change in circumstance.
Once you have your safety net, look at investment options that allow you to put in a small amount each month – a unit or investment trust, or online share purchases for example.
These will give you the skills and confidence to learn what investing is and see the effects of risk, reward and other changes on your investment sums. Read up and learn about investing, so you can decide from the start if you’re investing for income or growth and learn what type of investor you are in terms of risk.
This is a guest post from moneysupermarket.com