Investing money is like investing in your long-wanted summer body. And, the first thing you do to get that, is figuring out how many workouts you can put in per week. With investing the first thing you do is figuring out the amount of money you can put in (invest) – that is budgeting.
Putting enough time and effort to ensure that you are budgeting well to invest allows you to have a sense of security and the luxury to plan your long-term investments right. You do not want to invest more than you can and you end up injuring yourself or investing less than what you should and end up with a “dad-bod”.
Step 1: Know your resources—your income
- Side gigs or freelance job
In short, any consistent cash you get per month plus your savings.
Step 2: Know your expenses
This could be tricky, because you can often underestimate your spending. Make sure not to forget your rent, phone bill, monthly car installments, weekend dinners, morning coffees, Netflix subscription etc…
In short, everything you spend on to keep going each month.
Now, it’s time to face the facts. Is how much you’re making more than how much you’re spending?
Yes? Great! Please, skip ahead to the checklist below.
No? Looks like it’s time for some lifestyle changes. Don’t worry, you won’t have to skip your morning coffee. But, maybe you can start with only dining out every other weekend. Find out what your luxury expenses are and start making a few cuts there first.
Here’s the checklist!
Step 1: Be prepared for that rainy day (not literally). Don’t buy an umbrella, make sure you have an emergency fund.
In short, make sure you have savings that can cover at least 6 months of your expenses.
Step 2: Decide how much extra money you can allocate for investment.
Setting a budget can be tricky, this is why you should be realistic when you set it and open to revisiting it every now and then.
Think of it as a matter of trial and error, you will need to go back to your budget to make sure you can stick to it without stretching yourself too thin.
In other words, don’t make plans to give up fast food for 3 months because you know you’ll be dialing 19991 on about day 2.
Don’t worry if you’re still confused!
Even though there’s no one size fits all, here’s an example budget that works for many.
- 50% spent on essentials – rent, food, and transportation
- 30% spent on wants – dinners out, new shoes, and trips
- Now, you’ve got 20% left – it’s time to invest that in your future.
Now that you’ve got your budget. You’re ready to start learning more about investing. We’d suggest you start here.
Download the app
Get access to more educational material, learn how to invest in the stock market, and start trading with 0% commission and no account minimums.