One wouldn’t normally go for skydiving without training and parachute. In wealth building process Likewise, one should not jump directly into “investment” without reviewing their current financial situation and plan in advance. Opps, there are individuals skydiving without parachute ? OK, bad analogy, nevertheless, you get my point. You’ll have to track your regular monthly income & expenses and record it down. With this, it is possible to know where your cash will.

A positive net cash flow is the key for wealth building. If your net cashflow is in negative, then you would need to cut down on your expenses. There are several free apps for this purpose, or you could DIY yourself with spreadsheet. Like the above, only this time around is to be sure of your assets & liabilities round.

If your world wide web worth is in positive, congratulation. If it’s in negative, you’ll have to find ways to reduce your liabilities. How to reduce liabilities ? Save and reduces expenditures to pay off debts. Conserve emergency finance for min. a few months worth of your expense. Some would suggest to save up 6 – a year expenses, it is all depends on individual preferences and circumstances.

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Do not make investments all your money, as market can be volatile and you might be required to cash out at lost during emergency. Purchase insurance coverage to safeguard assets as well as your loved one, particularly when you have dependent. There are many types of insurance: health, accident, term life, whole life , critical illness, mortgage, home and others. Health insurance is crucial as cost of medical is expensive and it could easily wipe up nest egg that you built for years.

If you have dependent, then it is important that you should have term life or whole life insurance which spend upon your loss of life or permanent disabilities. The same applies to home loan insurance if you have excellent and dependent casing loan to service. It might be good to have a list of plans that you and your family having and keep all in a single place.

Some insurance agencies would do insurance summary free for you, all you need to do is inquire further. If you are paying high quality through GIRO yearly, then it is even more important to really have the list with payment time. You do not want to miss out any payment and lost your coverage, do you ? After conserving enough emergency fund and also have sufficient insurances for security, the next step would be clearing off high interest personal debt.

Some high interest personal debt examples are personal credit card debt, personal loan, renovation loan, with credit credit card interest rate rated the highest. Speaking Logically, you should start paying off highest interest personal debt to maximise the decrease in interest expenses. However, this may not the case always; for example, car finance interest is computed predicated on initial loan amount, paying off car finance won’t help reduce any interest expenses. Do not solely look at advertised interest rate, ask for effective interest rate (EIR) before getting any loan. Set a S.M.A.R.T. goal and arrange for how you want achieve your it. Your goal should be concise on what you would like and could accomplish with your available resources in a certain time frame.

It should be measurable so you could monitor your progress. Be honest to yourself, do not established an easy goal with regard to goal setting. I will cover the essential of dividend investment planning in next post. Investment is not just a grow rich quick scheme and every investment include risk, that is why it is vital to set your financial foundation solid before you begin investing. I hope the above information are of help to you, feel free to leave comment or contact me.