Obviously, you want your money to work from you, and you’ve probably heard that trading on various free markets is one of the best ways to go about this. While trading stocks, currencies and other securities can certainly lead to some major gains, not everyone is in the best situation to invest in anything riskier than a ready-made retirement plan. Here are a few things you need to do before you start trading...
Pay Off your Credit Cards and Similar Debts
If you have any high-interest debts, (anything with an interest rate above 8%) the only thing you should be worrying about doing with your money is paying down that debt. There’s no kind of investment with returns that will beat the money you’ll save by wiping your debt completely. Making an extra payment on a credit card with a 12% interest rate is more or less the same as making an investment that returns 12% a year after tax. There’s absolutely nothing on the stock market that will pay off with that kind of consistency. Furthermore, wiping your debt means you’ll have much more to set yourself up with trading in the first place. This is important for pumping money into the markets just as much as it is for the hardware and software you’ll need. For instance, EZ computers are one of the best models for trading, but they’re certainly not a negligible expense source: tradefromhome.org.
Work on Your Personal Spending Habits
We live in a society with a huge emphasis on consumerism, and as such, a lot of people get a bad taste in their mouth at the mere mention of cutting down their personal spending. You need to have the discipline to assess and improve your personal spending habits if you’re going to have even a little bit of success with your investment portfolio. This isn’t to say that you need to take a big chunk out of the kind of spending that’s most important to you. Instead, cut out the more negligible things; stuff that’s purchased quickly and then quickly forgotten. That latte you chug down without much thought or pleasure on your way to work, or some sweet treat tossed into your shopping cart on impulse. Watch for bad spending habits in your day to day life, and work on dropping them as soon as possible.
Establish your Big Goals in Life
One of the most fundamental principles of good investing is never investing without a purpose in mind. There are a number of reasons for this, but the main one to think about is that without a specific, measurable goal in mind, you can’t really assess your timeframe for investing, how much risk you should be taking on, and similar factors. With stocks, for example, there’s significant short-term risk, but in the long run, and we’re talking decades here, any stock tends to gravitate towards a stable 7% annual return rate. Think about where you want your life to be ten,
fifteen, twenty years down the line, and how investment will fit into that picture.