Poor Credit? Here’s Why You Should Still Invest
Most people who aren’t investing as a way to build their retirement nest egg have an excuse. It is a simple fact that most people who are not trying to grow a nest egg are in debt with less-than-stellar credit. They are more focused on looking for a way to stop themselves from getting deeper in debt.
Poor credit usually comes from bad habits, and bad habits generally lead to poor credit. This is a cycle that can be broken, however, with a few alterations in behavior. Change can be a good thing, although it may not be without a few pains along the way.
Investing is a positive habit
Investing for your future is a habit, and one you need to begin early and repeat often if you want to see any benefits from it. The longer you wait to start, the more difficult it will be to grow a viable nest egg that can replace your salary in your golden years, or possibly enable you to retire early.
Adding debt to debt
Before you begin investing, you should take stock of your debts. If you’ve got large debt on anything other than a mortgage, your first priority is to get out of debt as quickly as you can. The well-worn strategy that says you have to spend money to make money doesn’t necessarily apply if the money you’re spending is putting you deeper in debt.
While you’re clearing your debt load, immerse your brain in some reading. Remember that knowledge is power, and you’ll want to learn all you can from investing books before you catch a ride on the stock market trolley.
Finding the funding for investing
If you find yourself out of cash after you’ve paid the bills at the end of the month, you’re probably in better shape than many others. You’re not underwater on your debt, so you’re ready to look into investing. The first rule for investing is to make certain you have an emergency fund set aside, generally three to six months of income is sufficient.
You can set up a direct draw to automatically move money from your regular account into a savings account each month. This is the money you’ll earmark for investing. Shoot for 10 percent a month into the savings account. If you can’t hit that mark, do whatever you can. Something is always better than nothing. Decide on how much you want in this fund before you start your adventures in investing.
Set up your portfolio
While you’re building up your earmarked stock funding balance, you can play around with the stock market without risking any funds. You can set up a pretend stock portfolio using tools online. If you have accounting skills, you can run a make-believe fund in a spreadsheet.
Give yourself a fantasy investment starting figure and put the money into stock shares that you like. Every so often, take into account commission fees and taxes. Then compare your fantasy portfolio to an actual stock index to see how you’re doing. This little game will give you a feel for the realities of stock market investing.
When you’ve reached your starting fund goal, you’re ready to begin your first investments. All the reading you’ve done previously will come in handy here. You can find tips for beginning investing and if you prefer, you can engage the services of a professional investment manager to help you get going.