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Investments can be a very important part of your overall financial management. In order for your investments to be good financial management decisions, it is important that you have a very clear picture of how much money you have and how much of it can be invested. This is not an arbitrary decision, but one that should be made after considering several factors including those discussed here. Failure to earmark your money in advance could prove disastrous, because without a monetary plan you may find yourself inappropriately allocating money to the wrong purpose. Again, investments are only one portion of a good financial management plan that should also include
Determining income
Determining expenses
Amassing savings
Paying down debt
Reviewing your credit report/establishing credit
CAUTION
Deciding how much of your income is disposable and can be earmarked for investing should not be done arbitrarily but only after considering how much savings you need, what your expenses are, and how much debt you have.
Think of your plan as a budget. Although the word budget in itself is distasteful to many people, a budget can be used to make life a lot easier, rather than more constrained. A budget is nothing more than determining how much available money you have and the total of all your financial commitments. By knowing this information in advance, you can decide how much of your available cash you wish to allocate to savings, expenses, and debt. Doing this ahead of time will make your life easier since no unpleasant surprises will arise later on that you must handle. Once you've decided how to allot your money, you can determine how much of your disposable income is available for investing. Again, by planning ahead, you avoid placing yourself in uncomfortable financial circumstances later on.
I l @ ve RuBoard |