Investing For Beginners - Six Essential Steps

Investing For Beginners - Six Essential Steps

Earn as much as you can, save as much as you can, invest as much as you can, give as much as you can.
— John Wesley

Financial freedom has been in the press a lot lately and I belive it is a great thing. It has been discussed in different guises as

  • Financial Freedom

  • Financial Stability

  • The FIRE Brigade - FIRE stands for financial independence retire early

  • Or just simply FI - Financial Independence

One theme that is common to all of these is that you will need to invest your way to these goals. No matter what people say, you just cannot “save” your way to freedom and by save I mean merely sticking your money in your bank.

Therefore before we start investing there are steps that are important to take. We have set out six steps to take before investing. These steps are not intended to be completed before investing begins but you should be close to completing them to give you are chance of being successful with your investments.

Steps to Investing #1 - Dispel the investing myths

Unfortunately there is still a lot of work to be done to get most people comfortable with investing. Which is why it is very important to tackle your reservations about investing so that you have a clear mindset about the journey ahead. This is important because there are times when the investing ride may be bumpy and you will need to hold on to your hat, keep calm and carry on. We have written extensively here.

Steps to Investing #2 - Get a handle on your debt

We as a nation don’t like talking about how indebted we are but lack of understanding and effective action when it comes to your debt is one of the main things holding you back from your financial goal. When we discuss debt in blogs here, we are talking about the sort of debt that has not been taken out to invest in appreciating assets that will grow in future like property, education or business ventures. When it comes to debt do not feel like you are alone, average UK household debt stands at £59,000 when you allow for outstanding mortgages. The most important thing is to speak to someone and take action.

Steps you can start to take include

  • Finding out how much you actually owe

  • What the cost of your debts are, that is what interest rate are you paying

  • How much are you paying monthly

  • When will the debt come to an end

One of our MoneyNoters carried out this exercise as she journeyed from the depths of debt and it has been a life changer. Read about her journey.

Investing For Beginners - Six Essential Steps

Steps to Investing #3 - Embrace budgeting

For the first time in 30 years, UK households are spending more thant their income! The gap between their income and expense is being filled by drawing down on their savings and sadly taking on more debt. There must be greater factors that have led to this development but it goes without saying the importance of getting the basics right. The breakdown of your budget tells you where you can be more efficient and also what you have left at the end of the month for investing. Make sure to include your debt repayment in the budget.

Once you know the percentatge of your budget that can be invested then actually start investing it when you get paid and don’t wait to the end of the month. It is so important to pay your future self first

It is so important to pay your future self first.

Steps to Investing #4 - Build an emergency fund

Emergency fund or rainy day funds are talked about a lot of times and rightly so. Absence of that fall back fund is perhaps one of the major reasons for indebtedness especailly debt with high interest rates. It is also extremely worrying that 25% of British adults have no savings at all. It also plays a vital role when you are planning to start your investment journey. It means that when unexpected financial shocks happen you do not then have to disinvest what you have invested as Sod’s law would mean that when you are forced to disnvest that’s when your long term investment may be going through a bad patch. How much should you build up in an emergency fund? Your budget will give you a clue on what you need. Here’s what we think.

Steps to Investing #5 - Define your goals

What are you investing for? Pension, School fees, House or educational course? It is important to set out your goals and also time to achieve your goals. The time will feed through to what types of investment you should hold. Some times you will have several investment goals you are looking to achieve but it is important to prioritise them into level of importance. Your goals when written down will help keep you focussed and motivated.

Steps to Investing #6 - Get financially educated

It is very important to understand the basics of investing. Stocks, bonds diversification, risk, return and fees etc. That’s where we come in. We are on standby to provide the education or coaching you need to get started! Our coaching and educational packages can be found here.

Finally we wish you the best of luck as you take that leap into investing. Remember that it is the one key way to achieve goals such as Financial Independence, Financial Stability, Financial Independence Retire Early and others. Some books on investing are set out below.

Investing Reading List

1. Money: Know More, Make More, Give More

2. Junior Isas — how to invest for your children

3. Unshakeable: Your Guide to Financial Freedom

4.  Investing in Shares For Dummies


6. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! 

Best Christmas Present Ever - #FoodBankAdvent

Best Christmas Present Ever - #FoodBankAdvent

Five TED Talks Guaranteed to Change The Way You Think About Money

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