There are many forms of investing and investment types. The most common ones that people recognize are real estate, stocks, bonds, and mutual funds. The idea behind investing is to make your money grow for you; however, before you can start that process there are some items that one needs to be aware of. You as an investor will need to learn what income is, become a smart consumer, and learn how to save so you can invest. These initial steps will lay the foundation for your ability to become a great investor.
Income
Usually when we think of income we automatically think of our jobs as our source of income, which is correct. Income is the money we earn from our job to help us sustain our daily lifestyle. However, income could also come from inheritance, personal business, receiving gifts and other investments. Becoming aware of all your source of income is important, so that you can understand how much actual cash you are bringing in every month. Ultimately, you should be able to live within your means. These are the different sources of income:
- A regular job
- Inheritance
- Online selling products
- Lending money with interest
- Receiving financial gifts
- Owning stock shares with dividends
- Rental Income
- Garage sale
Consumption
- The word consume means how much you spend with the income you earned. This process is usually easy for any individual since all you have to focus on is going out and purchasing anything that looks appealing to you. There are no limitations to how we can consume, since online purchasing has made it very simple for us to sit in our homes and buy items, and before
we know it our purchased item is delivered at our doorsteps. In addition, credit cards have made it easy for us to consume even more with providing increased credit limits and reward deals. The problems start to arise when you don’t keep track if you are consuming more than the income you are bringing in; however, if your consuming remains less than the pace of your income, then you have done a great job of avoiding financial pitfalls.
Saving
When it comes to investing, the most difficult part of the process for most individuals is the ability to save. To become a great investor, you must become aware of the value of saving. Unfortunately, due to our high ability to consume, most people are living paycheck to paycheck and we do not have the discipline to save. Not only should you be able to save from your income but you should be able to increase your savings on a regular basis, and ultimately make the money work for you through investing. Here are some helpful tips to save from your income and control your consumption:
- Understand what your total income is
- Be aware of all debit and bills
- Have realistic budget goals
- Pay off all debt
- Limit unnecessary consumption
- Create a personal fund
