Friday, September 25, 2009

I have a little bit saved. Is it time to think investing?

Question of the day from @ayyitsrawb on Twitter:
I have a little money saved, is it worth learning about investment and stocks, or should I just keep saving it?

The short answer: learning is always worth it, whether it's about investments or anything else. The more you know, the better you can figure out which tools work best for you. Think of it this way: if you're going to be without any investments in stocks, would you rather that be simply because of ignorance of how the market works or because you made an informed decision that that kind of investing isn't for you? I know which I'd choose.

All that said, your question seems to also be a little about whether or not you're prepared to take the plunge, since you can start learning about any subject at any time. That's not an answer I can give, you but here are a few things to think about:

When you say you've got a little money saved, how much is a little? Are we talking about a few hundred bucks or enough for you to live off of for several months if you lost your income? Most financial advisers will recommend you have between three and six months living expenses saved for a rainy day and that's pretty sound advice given the recession we're going through.

Secondly, you shouldn't consider investing and saving money as an either/or proposition. They each have different purposes and the money you put toward them should be for different things. If I were to look at my own budget today (do you have one of these that you adhere to? If not...THAT'S what you should be learning how to do!), I'd see that every time I get paid I have money going into a savings account, a brokerage account, and my sons' college funds. Of course, not everyone has my resources or circumstances, but the point is by having a realistic picture of how much money you actually have coming in, you can realistically allocate it toward saving for all of your goals, not just one.

Good Luck.

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