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How to Become the Best Investor Ever

You shouldn’t invest a penny before you build a substantial savings account. This might sound counter-intuitive to an investor, but it's important to have a solid cushion of savings before you start putting your money into the market. Life is full of surprises. You don't want to be caught in an emergency that leaves you desperate for cash when all your funds are tied up in bonds, CDs and stocks.

Couple making informed financial decisions
The best investor saves first! Here's how below.


1. Follow the 50/30/20 rule. Financial advisors suggest that 50 percent of your income goes toward necessities, like your mortgage, transportation and food costs; 30 percent goes toward discretionary nonessentials, like dining out, paying for a top-tier cellphone plan and updating your wardrobe; and the last 20 percent goes toward savings. If you begin dividing each paycheck automatically, you will create a habit of saving that will greatly enhance your financial life.

2. Put away three to six months of living expenses. Now that you are in the habit of saving, the next sensible step is to put that money toward something substantial. Experts suggest the first step of saving is building up an account that is large enough to cover your living expenses for three to six months. This will tide you over in case there's an unexpected event that keeps you from earning your regular salary. That may be an illness, your company downsizing or anything that leaves you suddenly unemployed. Calculate exactly how much you need to live on each month, and start saving. Then, even if the unthinkable happens, you won't be up a creek without a paddle.

3. Build up a series of cash reserves - including an emergency fund. Aside from living expenses, it's important to have accessible cash for those unanticipated events, like a major household repair or a medical emergency.
PrimeWay Federal Credit Union wants to help you become the best investor ever.