Are you ready to invest?

As mentioned in the previous post, investing is exciting and action packed. Investing is the way to grow your money. However, most people forget to ask themselves whether they are in the position to invest. "Are you ready to invest?" As with everything in life, there are two sides to the coin.

On the one hand, the current euro zone crisis could be taken as a clear warning for you to rush out and away from the market. On the other hand, the euro zone crisis can be a signal for long term investors to slowly work their way into the market with the belief that crises are often opportunities in disguise.

Before you start to invest, it is important that you get your financial house or financial statement in order. Certainly you want to earn a good return on your investment without being clobbered. Only when you have systematically reviewed your finance will you be able to assess your readiness to invest in the future.

Establish your cash flow statement

You should be able to keep track of the direction of the cash flow, whether it is getting in or getting out of your pocket. You can track your cash flow by tabulating your monthly income and expense. If you have more money inflow than your outflow, then you are financially sound.

Determine your asset and liabilities

Next, you need to determine what are your assets and liabilities. Someone who has many assets and few liabilities will certainly be more financial ready to invest than someone who has few assets but many liabilities.

Have an emergency fund

Life is unpredictable.No one can predict what life brings, so having a really accessible reserve of cash to meet unexpected expenses make good financial sense. Examples of unexpected expenses include doctor visits, rate hikes in utilities, computer repairs just to name a few.You certainly do not want to be in a situation where you have to sell your investment during a down period to meet you financial obligation.

  Finally, while the investment market has been volatile for the last few months with the on-going euro zone crisis, it is still important for someone to invest to gain financial independent. Understand where you stand financially is the first step towards a sucessful investment. It helps you to recognise which instrument is in your best interest according to yout current financial situation.