This is the biggest lesson I learned in 2021.If you are thinking of investing, please make sure your debt level is somewhere manageable and don’t put an extra debt along the way. Make sure to be extra careful on money management too.
I learned it the hard way.
In previous post, I have mentioned that I will start Investing, opened an account and write my review on Etoro and Opening account with TD Ameritrade.
Also mentioned the importance of having an emergency fund.
However, I did not managed my financial very well, and I let my debt level snowballing too. Credit card debt and personal debt was not managed carefully. And worst, the emergency fund was not in a good position too. And these was my biggest mistake.
Eliminate Debt Before Start Investing
I’m not saying to totally eliminate debt before investing. What I mean is, the level of debt that we have is manageable. Your monthly income should at least cover all expenses including paying debt, and there should left some balance.
In this way, if we have some emergency needs of money, we don’t go look out for other debt to cover that expenses.
Have an Emergency Fund
This is the most important things we must have if we are to start Investing. When I started at the end of 2020, I felt finally I was able to save money and put it to work for me.
But I wasn’t patience. I know I debt level was high and I know that I don’t have a lot in my emergency fund. But I started anyway. I thought all are well. But it was not.
Plan Out and Have a Proper Financial Budget
I don’t have a well planned budget. I always go out with the flow. And that’s the problem too. I thought I was saving money, but actually I’m not. And that spells disaster.
After half a year started putting small money into my Etoro Account, I have some financial issue which needed a bit of money. But as I mentioned before, I don’t have a proper budget and I do not have a good position in my emergency fund.
As my last options, I liquidated 90% of my investment position to meet my needs at that time. Thankfully my position was in profit about 7-8%. With that profit, I was able to cover the withdrawal fee and the currency exchange fee.
I was lucky.
Imagine if it was during bear market and my position was in 7-8% loss instead. That’s not fun, but lesson learned.
Instead of putting money in my investment, I think the best way now is to have a proper budget and have a large nest A.K.A emergency fund, then only we can think to move forward with investing.
I hope if you read, you may learn from my experience too.
In another 2 months, we will be in 2022. My main goal will be to prepare a large emergency fund account.