Finance

The Most Important Rule of Investing

Only invest money you have and is disposable.

In other words, never invest money you can’t afford to lose.

What does that all mean? Basically, there are two buckets you need to think about.
Bucket #1: Your basic needs (Costs required to live)
make sure have enough money to live off of and it covers your basic needs. This includes rent/mortgage, food, utilities, transportation. Calculate that to determine your living costs. So depending on how much income you make, make sure you set enough money to cover those costs.
Bucket #2: The disposable income (Total income minus costs required to live)
That difference between your income and basic living costs is your disposable income, that’s extra money you have for anything else. That could be anything else that you might spend on, like shopping, or entertainment or leisure costs, that could be your Netflix account, video games, Yoga classes, or anything you do to relax.

Disposable income is money that if you lost, it wouldn’t put you in a situation where you would acquire debt when things get tough.

So only invest bucket #2. Most would try to spend all of their disposable income, and others would try to invest some of it. The ambitious would live very simply and invest all of it.
You always want to make sure you take your disposable income, and not put it all in spending. Take that money aside and put it away in your retirement first, savings account for rainy day funds second, and investments (stocks, real estate, classes or additional education to gain knowledge for yourself).  And if you have anything left over, go ahead and spent it on something you like.
Regardless, when you are considering using money to invest in something, make sure the money you put in is always disposable income and not take the gamble of dipping into money you need to live.

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