How Women Can Invest For Success
Getting ready to invest
By Gail Bebee
How can women invest for success? That’s a question which arguably merits a book length reply. In this, my first column for Heart Business Journal for Women, I will start to answer this question by tackling the subject of getting ready to invest. I’ll discuss the things that investors should do before actually investing their hard-earned money. In future articles, I will delve into investing topics such as how to choose a financial advisor, how to select mutual funds and investments that most women should avoid.
Let’s begin by answering two fundamental questions: what is investing, and why invest? Investing, quite simply, is using your money to buy something of value with the expectation of profit. People invest as a means to achieve personal goals with a financial component.
I’m convinced that everyone reading this article has personal goals which require some financial outlay. Investing can help you achieve these goals. However, before investing a penny of your hard-earned money, there are four steps you should take:
- Determine your personal approach to investing
- Pay off debt
- Pay yourself first
- Educate yourself about investing.
Let’s look at each of these steps in more detail.
Step one, determining your personal approach to investing, involves clearly identifying your personal goals, taking stock of how you feel about investing and assessing your current financial situation. To get started on this essential and worthwhile exercise, ask yourself a number of questions:
- Why do I want to invest? What are my investing needs and goals?
- What are my timelines for achieving these goals?
- What is my current financial situation? What are my debts? What savings do I have? How much can I afford to invest?
- Will I need ready access to the money I have invested?
- What is my risk tolerance; how much money am I willing to lose on an investment?
- How much time am I willing to devote to investing?
It will take some time to develop meaningful answers to these questions, time which will prove a worthwhile investment as you proceed along the path to investing success.
Gail Bebee, B.Sc., M.Eng., is an independent Canadian investor. Gail is the author of No Hype–The Straight Goods on Investing Your Money, all the investing basics for Canadians from the viewpoint of a savvy financial industry outsider. You can contact Gail by e-mail at firstname.lastname@example.org . Find out more about her new book at www.nohypeinvesting.com
Step two is to pay off any money you have borrowed. Reducing debt has a guaranteed investment return. It’s like receiving a guaranteed rate of return equivalent to the interest rate on your borrowed money. For example, if your credit card charges 18%, a typical interest rate for Canadian credit cards, paying off your balance before interest charges kick in is like receiving an 18% return on your money.
Step three is to pay yourself first, before you spend. Automatically saving a portion of every dollar you earn is a painless way to build up savings, which you can then invest. If you have the habit of spending whatever you earn, consider such a savings plan as spending on yourself first. You can do this by arranging for the automatic transfer of a portion of every pay from the bank account where your pay is deposited to a separate savings account. If your employer has an employee savings plan, sign up for automatic contributions from every pay cheque. Some employers even match or partially match your employee savings plan contribution. Take advantage of this option if it’s available – it’s free money.
The final step in getting ready to invest is educating yourself about the world of investing. This may seem a daunting task, but it needn’t be. You can begin simply by reading a basic book on investing or by regularly scanning the business section of a daily newspaper or major news web site.
Determining your personal approach to investing, paying off debt, paying yourself first and educating yourself about investing are the four key steps to getting ready to invest. Why not start your journey to investing success today by taking the time to identify your personal goals and reflecting on how you plan to achieve them?