Look out for these signs!

If you’ve been reading Vestpod for a while, you probably think investing your money in the stock market could be a good idea. We’re always talking about it, and it seems like a direct path to intelligent personal financial management. Right? Well, maybe not right now. Because you might not be ready yet. Yes, investing your spare funds can bring you financial security, but you need to have strong practical and psychological foundations in place before you start building wealth on the markets.

Check out our top six ways to know you’re ready to take the plunge:

1. You’ve paid off expensive debts

Credit cards are the priciest form of debt, and there’s no way that your investment returns can outrun the cost of this sort of debt. So it makes no sense to start investing until you’ve paid off those pesky cards, or you’ll be fighting a losing battle against debt.

2. You already have a long-term mindset

Are your personal money goals all about next year or 20 years hence? It’s fine to have short term goals, and for many of us, especially those who don’t own a home, it’s essential that in the next 5 years or so you achieve your savings aim. Ditto if you’re in your twenties and want to save up for quitting your job and making a last-gasp round the world adventure before settling down. Or (more sustainably) re-training for a career you feel passionate about. But once all that’s taken care of, your sights should be on retirement. If that sounds like you, you’re ready, lady!

3. You understand financial markets

Yes, reading Vestpod every week has made you more of an expert than your friends and colleagues, but it pays to get yourself a detailed book on investment and study it. Like a student. You know, with highlighters and post-it notes and stuff. Then you’ll have the confidence to talk (and think) about different types of shares, bonds and funds and really understand what you’re getting in to. You can also come along to a Vestpod workshop!

4. You have an emergency fund

As with eliminating credit card debt, this is the bedrock of your financial health plan. If you don’t have one yet, that means you have neither the means nor quite the right attitude to make good investments. Which is totally fine, by the way: just focus on putting aside 3-6 months salary, minimum, in case of unexpected job loss or health problems. It’s easier than it sounds, once you really understand why you’re doing it and the great sense of relief and security it will bring you every day, just knowing it’s there.

5. You can control your budget

This means understanding that if you spend more, you need to earn more. And if there’s no immediate way for you to earn more. If you can’t sacrifice those transient pleasures like lunches and mood boosting lipsticks, work on psyching yourself out of that immediate gratification mindset. And if you feel like you just can’t give up your morning coffee, then maybe it really is a vital part of your wellbeing, but we bet there’s another daily expense that isn’t, which you can cut out.

6. You know what you want, and your partner agrees!

It’s not always obvious to us what we really, really want. It can take long hours of soul searching to discover our true hopes and dreams (beyond the usual ones of winning the lottery and discovering the secret of eternal youth). Take your time – and that could mean weeks, months or years – to establish what your savings goals really are. A round the world trip? Extensive handbags? A new palace? Or is it maybe that feeling of security and relaxation that would come from not worrying about what you’re going to live on when you can’t (or don’t want to) work anymore.

Next, make sure your significant other is on board. Even if you have separate accounts, there’s no point one of you never going out for dinner because they’re saving for an expensive purchase if the other one thinks that’s a mad way to live. Find some common goals, and working towards them could bring you even close together.