Personal Financial Management

Personal Financial Management

Beyond the basics of Personal Financial Management

The presumption of this post is that you have managed your personal finances nicely. You have no major debts, you have a healthy 401(k) big enough to carry you through retirement, an equally healthy savings account, an emergency fund for any unexpected expenses, and generally no serious financial worries. You are in a position in your personal financial life to start wondering what lies beyond the basics so you can make use of any extra money you have to make more money. The next step for most people would be investing in stocks.

However, there is more involved in smart investing than picking up stocks. Even buying stocks from a seemingly solid company like Facebook can tank and bring you down with it if you do not know what you are doing.  Follow these steps and you can be sure that you will not risk more than you can afford.

First, establish your pain point.

It can be tempting to risk everything on a buy that seems like a sure thing, but investing in stocks is uncomfortably too much like gambling for the novice investor to be sure of anything.  Consider first if you may not actually make more money by paying off any interest-bearing debt you have, for instance. If you have covered all your bases and have a nice sum you can play with, then investing may be a good option for you. However, you have to decide on how much you can afford to lose before anything else. This is not being pessimistic, just pragmatic. You buy stocks hoping to make a killing, but you need to be prepared to lose all of it. It can happen, so make sure you have a budget and stick to it.

Find an investment advisor

If you are going to play the market, you need to know the rules. The best source for the information you need is an investment firm, and what better firm than the one handling your 401(k)? They are usually conservative folks, so while their advice may not be exciting, they should be rock solid.  They may want you to put in more funds into your retirement, but they will typically be willing to guide you in choosing other investment routes if you want them to. You may also join an investment club, which is sort of a cooperative where a group of people pools their money to make investments. It is a good opportunity to learn how to invest while on the job, so to speak.

Go a little further

If you feel that you are ready to deep dipper into the investment pool (always keeping to your upper limits), you can try taking a little more risk by putting money in property or something more volatile than mutual or government funds.  Before taking the plunge, make sure that you do your research and get feedback from financial planners and accountants. If you have your eye on a particular company, take the time to observe how the stock performs before buying.


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