Millionaires don’t earn their money overnight. They often get there via hard work and clever investments. Many of us don’t mind doing the former, but it’s the latter that often clogs those who need a consult with a mentor to know where they can start.
Here are some simple guidelines on what is an excellent investment and how to avoid bad ones. People can put these first three or six steps into practice depending on at what financial point in their lives they may be when starting out. If you are just starting out on the road to financial health, set these three goals to achieve now: positive cash flow, savings goals, and building one’s capacity to invest.
To achieve positive cash flow, make more money and/or spend less. This is achievable by increasing the ways you get active or passive income or decreasing your expenses (especially after identifying the nonessentials first). Positive cash flow contains earning more money or spending less money, although doing both is ideal.
Set up an emergency fund. Save an equivalent to at least three to six months’ worth of expenses and then other funds for your short, medium- and long-term needs. Building a separate fund for investments will take time, but so will your capacity to decide which investments are best for you.
There are some more important aspects of financial management that money-smart people should learn or know about. Reading books or blogs about personal finance and videos might help as it can be an “eye-opener”.
Education is an investment, and it builds competence and abilities. This is a wonderful investment not only for your children (if you have any) but also for yourself to gain an edge in the market or workplace. It is good to pay good attention to building your skills and honing your abilities, whatever the job or position you may hold. Assuming that you already have an emergency fund and no debt, it is important to determine your investment objectives and time frame as well as assess your tolerance for risk. I recommend newbies should practice in small amounts. Being good at taking risks can be very profitable, but this requires practice.
In essence, whatever your goals may be, you must be a no-nonsense investor, because great investment opportunities can be like losing in card games if one does not pay full attention to what is going on. You should only take risks when you already have savings and non-risk investments to fall back on and should be cautious in putting everything you have into a risky investment. These simple tips may take some discipline and attention to detail, but if you believe that making money works for you, you will be part of a group that is working smarter, not just harder.
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