2.2 Budgeting


What this topic covers:

  1. Covering your bases
  2. The benefits of regular investing
  3. Being flexible


Get your bases covered before you start



“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

- Warren Buffet (One of the most famous investors and Chairman and CEO of Berkshire Hathaway)


It’s never too early to start investing and working towards your financial goals. The sooner you start, the longer you’ll be able to benefit from the investor’s greatest advantage: time. However, before you get to work on your portfolio, make sure you have all your bases covered. That is, you have a handle on any debts and you have money set aside for an unexpected emergency. See here for why you should set up an emergency fund.


It's important when creating a budget to figure out how much you can afford to invest without compromising your lifestyle as you aim for your goals.


The benefits of regular investing

Many investors choose to invest regularly. Regular investing means sometimes youʼll get more (shares for example) for your money and sometimes you’ll get less. But over time, the fluctuations in price tend to balance out. And if you’re buying a specific stock at regular intervals you’ll also be able to take advantage of dollar cost averaging (we’ll cover this off in detail in the next topic).


Regular investing also helps you get in the habit of investing, so that it becomes another part of your lifestyle.


Leave some wiggle room

As we mentioned above with the emergency fund, be realistic with your budget and how much you’re comfortable investing. Remember, investments come with no guarantee of returns. And if you’re investing for the long term, you may need to be prepared to “lock away” that money for a period of time. Can you afford to do that?


Life happens; no one can plan for everything. So be prepared to adjust your goals every now and then. Be flexible and check in from time to time to make sure your goals are still guiding you in the right direction.




Next topic: 2.3 The bigger picture


Disclaimer

CommSec Learn is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a market participant of the ASX & Chi-X Australia, a clearing participant of ASX Clear Pty Limited and a settlement participant of ASX Settlement Pty Limited.

 

 

Disclaimer

This site is directed and available to and for the benefit of Australian residents only. © Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and both entities are incorporated in Australia with limited liability.

By clicking on the "Download the CommSec App" buttons above, you will be directed to itunes.apple.com or play.google.com. These sites are not affiliated with CommSec and may offer a different Privacy Policy and level of security.

Top