Investing Basics – Steps Before You Start

One of the “rules” of investing is to diversify – spread the risk. No matter where you invest and there are other options besides stocks, following a process will help you and your family achieve financial success and independence. Here is the order:

Manage your money. Know where the stuff goes and control its flow. We use a budget.

Get out of all debt except the house. The money being paid on debt will now be free to invest.

Protect against catastrophe. Have the right kind of life insurance and an emergency fund in a safe place. We recommend 3-6 months of living expenses.

Own your own home – or have convincing reasons for renting. Anyway, know both sides of the question. This means not over buying, putting down a good down payment – 25% of your take home pay as a monthly payment.

Never invest in anything you do not understand and cannot explain.

Know as much as you can about stocks and the companies you are buying. Stocks can be very rewarding and also a dangerous investment. Investing in stocks give you a piece of a wonderful growing and expanding America and world, something people in other countries would love the opportunity to own.

Know the language of the business and businessman. You’ll need to know it to invest.

Know the techniques of investing in the alternatives to common stocks. They are bonds and preferred stocks and various forms of real estate and mutual funds.

Naturally, all these topics may not interest you. But do not forget. There is a order for success. When it comes to taking action, go slow one step at a time.