Things To Do Before You Start Investing (Building A Solid Financial Foundation)

Before you invest, make sure you have built a solid financial foundation.

Like building a house, you must build it from the ground up. Build it right. Build it strong. You can build a proper financial foundation.

Robert Kiyosaki said, "Education is the foundation of success. Just as scholastic skills are vitally important, so are financial skills and communication skills."  Maybe you're asking, how can I build a solid financial foundation, and why is it important?

Building A Strong And Solid Financial Foundation

It is important to build first your financial foundation before you start investing.

Spend less than what you earn

Many people struggle to live within their means. If you start investing while you still have bad financial habits, you’ll have a hard time building your wealth even if your investments have high returns. 

​Know and increase your cash flow

You need to increase your income. Never depend on a single income, create multiple income streams. A budget is a cash flow plan and will let you know how much you can afford to invest each month.

Health Care

The greatest wealth is health. Some companies provide HMOs for their employees. HMOs (Health Maintenance Organizations) plan will help shoulder the cost of healthcare. Most medical procedures, emergency assistance, and even confinement are covered. More savings for the employee or person who has an HMO plan.

Life Insurance

Getting life insurance just makes sense; it's one of the responsibilities of having a family you care about. Our family is very important to us. So if we think good for our family then need to go for a good life insurance policy. Getting life insurance will give you the maximum benefit in the future. If someone you love relies on your income, you need life insurance. Protect yourself and protect your loved ones.​

Debt Management And Save Early

Control your debt, or your debt will control you. A lot of people go into debt just to keep up with those who already are. Eliminate debt, especially credit card debt.​

Paying less in interest is like an investment gain. Don't compare yourself with others. If you buy things you don't need just to impress others, soon you will have to sell things you need. Change your mindset about money. Save money and money will save you.

Rule of saving money, "Every peso counts." Discipline and consistency are the keys.

Emergency Fund

Emergencies will happen, so be prepared so they don't derail your financial plan. The main purpose of an emergency fund is not an investment, it's protection with one purpose - to protect you and your family just in case there's an emergency. You should set aside 3 or more than 6 months' income to help cope with emergencies and unexpected changes.

Know your net worth

Net worth is the peso value of what you own minus anything you owe. If you’re more focused on your paycheck rather than this figure, it’s a sign that you may have to tackle short-term financial goals first, such as having enough savings.

Define goals and priorities

What are your goals? Why do you want to invest? What are your deadlines? Building wealth is a long journey. You will need to make a lot of sacrifices.​

Surround yourself with like-minded people

You could have the right mindset, but if you’re around people who don’t share the same financial perspective, it will be harder for you to take control of your finances and commit to your investment plans. Be around people who will support your financial journey.

Understand the Rules of Investing

Many beginner investors rush into investing without knowing how to do it, losing money in the process. Study first before invest. Research! Make sure you have a piece of knowledge in every investment instrument that you are going to choose, especially the risk and other basic concepts.