The First step before considering investing or working with a financial professional is to asses your financial picture. You first priority should be to calculate what it cost for you to live for one month. This includes things like, rent, food, insurance bills, house bills, having fun money, car payments, and any other bills you may have. A great thing about playing basketball is that a lot of these “real life” expenses do not apply to us at the moment which makes it a great opportunity to begin to save money.
Once you have made this calculation and hopefully you have a positive number remanding, your next priority should be to pay off your credit card bill (If you have one). Having good credit plays a big part in making big life purchases (house, car, or loan) which I will talk about in a later post. The quicker you can pay off your credit card the better. Credit Cards have a lot of pluses, but when they are not paid off at the end of the month they can become a big big problem. I will also discuss benefits of credit cards in another post.
The next step I would recommend would be to begin putting a little money away for an emergency fund. They say you should have 3-6 months of income set aside for your emergency fund. The emergency fund is a way to set money aside every month in a location (Savings Account preferably or separate bank account) where when something unexpected happens you have money already set aside waiting to be used that does not affect your normal income stream. Otherwise, you would be forced to use your creidit card which could lead to more debt and financial troubles if it is not paid off on time.
A number of things could arise where you would want an emergency fund:
Lose your job and need cash while you look for a new one
Dog/Pet gets sick
It could be anything that is totally unexpected where it is nice to have cash already set aside for this type of occasion.
The best place to store this money is in a Savings Account. Any bank should have a place where you can set this up. You want it to be separate from your banking account because your banking is being used all the time for other daily purchases. You want your emergency fund to be in a place where you have quick, easy access to it, but not in a place where you may be tempted to use the money from it for non-emergency purchases. This is where you would use your Bank/Debit Card.
Once you are set in these two areas (credit card and emergency fund) you can begin investing for short-term and long-term financial goals.
Don’t worry if this leaves you with only a little cash to get started with. Saving and Investing a little now is way better than not investing or saving at all.
Here is a simple formula for the above text:
Total Monthly Income – Monthly Living Expenses – Credit Card Debt – (But really a plus) Emergency Fund Money =
Amount of money you should be looking to invest for your financial goals.