My laundry list of what you need to know before investing

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This week I had the absolute pleasure of sitting down with Em Rusciano to talk all things money on her podcast Emsolation, and I was asked a few questions I thought were worth expanding on.

For many of us, embarking on an investment journey can be more overwhelming than it is exciting, and while some of you might want to dive right in and have absolutely no issues making the first move, most of us don’t know where to start or what we need to prepare before we begin investing.

Embarking on an investment journey can be more overwhelming than it is exciting, and most of us don’t know where to start or what we need to prepare before we begin.Credit: Dionne Gain

Given this, I’m going to take you through my laundry list of everything you need to be across before you take the plunge into becoming an investor.

Before you start investing, the first thing to do is take a close look at your budget and cash flow. I know it can feel a bit icky and overwhelming, but I promise you, every good financial decision comes from being in a place of control.

Gone are the days of a budget being a restrictive instrument that operates much like a diet – these days a good budget is only about transparency. It’s about being able to see how many dollars come in, how many dollars leave and what they’re leaving for. This is going to put you in the position of being able to see what surplus you have to invest with, so you’re only investing what you can afford rather than making a decision that could come back to bite you.

The second thing we need to do is look at personal debts – we’re talking personal loans, credit cards and buy now pay later schemes. In Australia, the average interest rate on a credit card is 19.94 per cent, whereas the average return of the Australian share market is 9.8 per cent over the last 30 years according to Vanguard.

Investing doesn’t have to be hard, overwhelming, or something reserved only for the rich.

What this means is paying down your personal debt in this situation is an investment in itself, one which you’ll get a much better return on. After saying this, many people ask me “well, what about my mortgage?” To answer that, we need to look at your personal interest rate.

As of the 3rd of July 2023, the average variable mortgage interest rate is 6.95 per cent, so it’s really going to come down to your own personal values and how much cash flow you have available to work with. By freeing yourself from the burden of debt, you’ll be better positioned to invest with confidence and pave the way for a brighter financial future.

The third thing I want you to do is to define your objectives. I’m a fluffy kind of gal – and I love getting into the nitty-gritty of what drives people to make the decisions they do because this helps create a plan that’ll last well into the future.

Investing without clear objectives is akin to jumping into the car without any idea of where we’re going or where we started. So let’s think about why you’re investing for a moment.

Are you trying to create a comfortable retirement, are you funding a dreamy European vacation, or are you building wealth for your children’s education? Understanding your investment objectives will enable you to tailor your investment strategy to align with your aspirations.

Once you’ve got an idea of what your goals are, please, please write them down. Not because I think you might forget them immediately, it’s because research has shown us that those of us who write down our goals are 42 per cent more likely to achieve them than those who don’t – and I want what’s best for you!

The fourth thing I want to talk about is risk. Investing inherently involves risk, and understanding your risk tolerance is a fundamental aspect of becoming a smart investor.

A risk profile is kind of like a personality profile, except it considers your goals, your investment time frame and the level of risk you’ve articulated you’re comfortable with or can afford to take.

For some people, this is going to mean they only want to dip their toes in the water with very conservative investment assets, whereas others might jump right into international shares. There’s no ‘right’ answer here and what works for one person might not work for the next – it’s all personal.

As time goes on, it’s important to consistently review your risk profile, as you might find that over time as you gain more experience, education and confidence your profile could change. By aligning your investments with your risk tolerance, you’ll ensure a smoother investment journey and maintain your confidence when the market fluctuates.

If you’ve managed to tick off every step I’ve outlined, my friend it’s time to start doing some research now into where you want to invest. If you’re still feeling like navigating the investing world is a bit overwhelming, don’t worry – this is my bread and butter. I’ve got hundreds of podcasts you can listen to, and if you’re still looking for a helping hand, consider seeking professional advice.

Investing doesn’t have to be hard, overwhelming, or something reserved only for the rich. If you can follow the steps I’ve outlined above you’re going to be in a very comfortable position to start creating financial freedom – but please remember that a solid financial foundation will be your greatest asset.

By understanding your budget and cash flow, eliminating personal debt, and defining clear investment objectives, you’ll embark on your investment journey with confidence and purpose.

Remember, investing is a long-term commitment; stay informed, seek professional advice when needed, and be patient as you build the bridge to a successful and prosperous financial future because, unfortunately, there’s no such thing as creating instant wealth.

Victoria Devine is an award-winning retired financial adviser, best-selling author, and host of Australia’s number one finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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