When Should You Invest?

Should You Invest - Complete Controller

In financial planning, the main objective is to sustain our basic welfare by covering expenses and avoiding debt. Similarly, the best reference to measure profitability is basic welfare. Without this link to welfare maintenance, consumption, acquisition, or money placement is meaningless.

Therefore, it is necessary to know and isolate the cost of this basic welfare to estimate the projected surplus generated in a period. Of course, this gain will be affected by decisions and contingencies that occur during the period.

This information is relevant when considering an investment since the decision to convert liquidity into risk capital will be conditioned and directed based on the goal to maintain basic welfare. Exit Advisor Therefore, this conditioning implies:

  1. The coverage of the primary liquidity risk, including the availability of a contingency fund.
  2. Attention, with the corresponding liquidity, of annual expenses that are not recurrent monthly – insurance, tuition, seasonal gifts, clothing, equipment, etc.
  3. Consider that our active source of income – work, profession, or business – is not threatened immediately.

Only after having reviewed these risks are we ready to invest. If you have doubts about any of these points, it is preferable to postpone the decision to invest until resolving them. For example, suppose you are concerned that an investment may negatively impact a college fund. In that case, it is best to avoid investing until there is enough capital to risk without jeopardizing existing financial commitments. ADP. Payroll – HR – Benefits

Once we are confident an investment will not threaten basic welfare, we need to ensure that the investment will benefit our financial goals. This does not occur automatically, as it is easy to lose direction when making decisions about transactions that we make daily. When we see things from this perspective, we understand that a good investment does not necessarily imply maximizing the specific benefits. A good investment directs the effort towards achieving our life goals, whatever they may be.

Some additional questions we can ask ourselves to confirm an investment is suitable and timely for us are the following:

  1. Will the investment help me achieve my life goals? Which objective will be met? How will it help me?
  2. Does the investment imply costs or risks that will mean a burden for my active income? If that is the case, do I have the financial ability to face these costs without jeopardizing the sustainability of my basic well-being?
  3. Does the investment correspond to my current life stage? Is it appropriate to invest at this time, or is it more convenient to do it at a later stage of my life? Does it correspond to a previous stage, and will it not be so easy to take advantage of its benefits?

As we consider these questions, let us review them in the context of a typical investment opportunity. Cubicle to Cloud virtual business

Suppose you decide to acquire a property because it is a reasonable price but depends on 100% of your active income to supply your basic needs. In that case, it will be the most expensive property you can purchase because it will bring more significant risk to your well-being. That is, the cost of the property is not just the sale price but also the financial toll it may take on your savings, current bills, and increasing debt. 

However, if you have met your financial obligations and decide to purchase the property, the purchase price is not as costly. Of course, it is always preferable to buy at a lower price, but it is much more important not to compromise or risk your future well-being to take advantage of an opportunity. The key to investing is the price and profitability comprised of decisions aimed at supporting well-being.

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