When Should You Start Investing?
I always say, the best time to start investing was twenty years ago, the next best time is Now…
But, there is no point starting to invest and start working on accumulating wealth if you have not done the following!
Paid down most commercial debts (ie; car loans, BNPL payments, personal loans, credit card loans)
Grown an emergency fund or save-your-ass fund
Have developed an automated cash flow/budgeting system that means you can sleep at night.
Set-up your Superannuation and review it every 12 months
You could potentially add, buy your first home, to that list if that is a goal of yours in the next three years as well. Essentially, to take a phrase from the well-known Dr. Jordan Peterson, you need to “set your house in order” before you can take on bigger goals, such as investing for the future.
What does, “set your house in order” mean?
Well, it is quite simple, it means that you need to open up the financial closet and clean it out, dust for cobwebs and put your brave pants on to see if there are any nasty creepy crawlies hiding in there.
Which is why you need to complete steps one to four from above, and potentially add step five of buying your first home as well.
Once you have completed all of the above, that is when you can start looking at investing and taking your wealth more seriously. The best part is, you are already investing inside of your super. As long as you are employed, your employer has an obligation to pay you superannuation in Australia, which has tax benefits to you and will be an automated way for you to invest for your future. I would suggest that you check your Super balance and make sure you have been getting these contributions, and if you have not, ask your employer immediately!
(I will not delve into Super in this article today, however I will have a Superannuation series later down the track where I will go through all the Do’s and Don’ts of Super.)
Another reason for setting your house in order and cleaning out your ‘financial closet’ is to make sure that you are not losing sleep at night over money. A survey was complete by the Financial Planning Association of Australia and they found that 20% of men and 27% of women are somewhat stressed about finances.
Which means almost a quarter of those surveyed were most likely losing some sleep at night due to money, which should never be the case, not if you clean out your closet and “set your house in order!”
And finally, the most important reason to not start investing until you have done the above is because you don’t want to lose out on your investments.
Investing to accumulate wealth should be a mid-long term endeavour, meaning you should be holding an investment for seven to ten years. That means, if you have an emergency pop up, you do not want to have to sell that investment, and potentially make a loss, because you didn’t have your house in order.
Investing money in the share market, crypto or any other volatile investment vehicle, that you need today or over the next twelve months, means you increase your risk of losing some or all of that money.
You need to make sure that if you are investing any money, you should be investing money you do not need. I take the mentality that I may even lose all of that money, not that it will happen, just so that I never have to think or worry about having to dip into my investment and potentially lock in losses if something came up.
So, when should you start investing?
When you have been able to set your house in order and cleaned out your financial closet.
Once you have been able to do all of steps one to four and potentially step five, you will be free to use the excess money that you do not need to invest. That is when you could set up a meeting with a professional, such as a Financial Planner, to help you with your investment choices that is specifically tailored to your goals and dreams for the future!
Over the next article, I will be delving into understanding where you could start investing, based off of what risk tolerance you may have and potentially based on your own personal goals, values and the time you want to achieve these.
Until next time,
Take Back Control
If you have found this Blog valuable, I would love it if you shared it with friends and family. The more the merrier, as I want to see each and every one of you learn to Take Back Control of your Life-Health-Wealth !
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