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Investing - getting started

Once you've got your cushion, you can relax

“A billion here, a billion there, and pretty soon you are talking big money.” Everett M. Dirksen

Investing is just a flash word for what people do to their savings to make them grow. It’s a long-term thing (for proper investing you should have your money put away for at least five years) it is about making your money make money for you.

Before investing – sort out your ‘cushion’

Whether you are on a top salary or just struggling through on the basic wage, before you even think of investing you should first make sure that you have got rid of all non-mortgage debt. There is no point investing until you have got rid of debt (unless it is 0% debt, in which case you can).

The next thing is to make sure youand that you have some money saved for a rainy day.

It’s vital to save up enough money to cover you for three to six months in case of emergencies before you start investing.
This means that if you lose your job or get ill or your marriage breaks down, you could keep going for a few months without having to worry.
If you don’t have this kind of emergency money, you could find yourself having to sell your investments just to get cash quickly. This is not a good idea because you may find that you need cash just at a time when your investments are not worth as much as they could be at a later date.

So sit down and work out how much you would need, realistically, to keep going for three to six months. Start putting money away in a high-interest building society or bank account until you have that amount saved. It used to be that only the postal accounts or long-notice accounts gave high interest but now quite a few instant access accounts offer the better returns, so go for one of those. See our comparison tables for the best deal.

Once you have your financial ‘cushion’ then you can start on the fun stuff!

Jasmine and the Moneymagpie team, 0
Moneymagpie Moneypedia
14.02.2008