2.2 Budgeting
What this topic covers:
- ✓ Covering your bases
- ✓ The benefits of regular investing
- ✓ Being flexible
Get your bases covered before you start
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
- Warren Buffet (One of the most famous investors and Chairman and CEO of Berkshire Hathaway)
It’s never too early to start investing and working towards your financial goals. The sooner you start, the longer you’ll be able to benefit from the investor’s greatest advantage: time. However, before you get to work on your portfolio, make sure you have all your bases covered. That is, you have a handle on any debts and you have money set aside for an unexpected emergency. See here for why you should set up an emergency fund.
It's important when creating a budget to figure out how much you can afford to invest without compromising your lifestyle as you aim for your goals.
The benefits of regular investing
Many investors choose to invest regularly. Regular investing means sometimes youʼll get more (shares for example) for your money and sometimes you’ll get less. But over time, the fluctuations in price tend to balance out. And if you’re buying a specific stock at regular intervals you’ll also be able to take advantage of dollar cost averaging (we’ll cover this off in detail in the next topic).
Regular investing also helps you get in the habit of investing, so that it becomes another part of your lifestyle.
Leave some wiggle room
As we mentioned above with the emergency fund, be realistic with your budget and how much you’re comfortable investing. Remember, investments come with no guarantee of returns. And if you’re investing for the long term, you may need to be prepared to “lock away” that money for a period of time. Can you afford to do that?
Life happens; no one can plan for everything. So be prepared to adjust your goals every now and then. Be flexible and check in from time to time to make sure your goals are still guiding you in the right direction.
Next topic: 2.3 The bigger picture
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