You’ve worked hard and built up your savings account. Now it’s time to make your money do more for you through investments. But there are some key points to consider before you begin.
Keep a set amount in savings for emergencies
Investing requires a time commitment. The money you invest requires time to grow and shouldn’t be withdrawn prematurely. This means you should have a separate emergency savings account to cover life’s unexpected expenses, and enough money stashed away in a savings account or CD for planned expenses, such as a wedding or a down payment for a house.
This amount does vary, but it should be easily accessible. A good rule of thumb is to have three to six months of living expenses in reserve.
Paying down your debts
Your mortgage, student loans and car loans are all considered good debt, and are OK to have while you invest. But, if you carry a credit card balance, then pay it off first before you begin investing. Otherwise what you earn in investments will be lost in interest payments to the credit card company.
Setting goals and timelines
Once you decide how much you want to invest beyond your emergency savings account, you need to set goals and objectives for this money, including how long you want to invest.
For some goals, the time commitment is already established. For example, if you want to supplement your retirement income, then your time commitment is the number of years between when you begin investing and retirement. Other goals, such as saving for life’s “what if” moments, have less defined timelines, and that’s OK.
Choose a financial adviser
I may be biased, but starting with your financial institution is may be a good move. You’ve already built a solid relationship with them and trust them with your other financial matters. Why not trust them with your investment goals? Another good way to find a reputable financial advisor – who keeps your best interests in mind – is by asking a close friend or relative for their recommendation.
When searching for financial advisers, find out how long they’ve been in the business. Look for a long track record of satisfied clients. If they’re less experienced, ask them what they’d do if they were investing their parent’s money.
Lastly, make sure you set the guidelines for how often you’ll meet with your adviser. Some investors are comfortable meeting once a year; others want to check in every quarter. No matter what your preferences are, your needs will change and you’ll need an adviser who’ll be there to help you when they do.
Make sure you choose an adviser that addresses your goals, timelines, previous experience with investing and comfort level for risk. It’s a good indication they’ll put together a plan that works, and also helps you set realistic expectations of what your investments can do.
Bob Blaze is a licensed Financial Adviser with IH Mississippi Valley Credit Union Investment Services. He’s been helping people reach their retirement and financial goals through investments for 20 years.
Securities offered through Broker Dealer Financial Services Corp., Member FINRA & SIPC. Securities are not are not federally-insured; are not obligations of the credit union; are not guaranteed by the credit union; involve investment risk, the value of the investment may fluctuate, the return on the investment is not guaranteed and loss of principal is possible; may be offered by a dual employee who may accept deposits on behalf of the credit union and may sell non-deposit investment products on behalf of a third-party securities broker-dealer.