The pandemic caused by the coronavirus changed the way we all live our lives. Before this virus spread like wildfire and we had more freedom socially, it seemed like the world is our oyster and we welcome so many opportunities. But the coronavirus outbreak affected economies all over the world and as it continues, many plans are still uncertain. However, life should not stop just because of this invisible enemy.
The question on everyone’s mind right now, especially those who have such entrepreneurial spirit is whether now is a good time to invest or is saving better?
In the US, recent data suggests that Americans were able to save more during the pandemic. According to the latest figures, credit card delinquencies have fallen and at the lowest since 2017. In simplest terms, more people can pay their credit card debts on time. So, if you’re one of those who have been holding off on investing but decided to finally do it this year, here are some questions you might want to answer first.
Have you secured your emergency fund?
After everything that’s happened last year, you probably already learned that preparation is key. Securing your emergency fund is important, which should cover at least three to eight months of living expenses. The easiest way to figure out how much you would need to save is to compute your essentials budget which usually consists of your mortgage or rent, utilities, and groceries. You will need to make sure that you will have enough for these expenses. Given the economic conditions, job security surely must be a top priority.
How much risk are you willing to take?
Australia remains to be a nation of investors. According to data released in 2020, there are about 9 million adult Australians with investments outside of their primary dwelling, and there has been an increase in the number of new investors, which means that there is a growth of interest when it comes to investing. However, I think we can all agree that investment requires talent, but most of all it requires guts.
If you were able to secure your emergency fund and you find that now is the time to invest, you should probably calculate how much risk you can tolerate – or your ability to accept that investing comes with losing money. You may need to consider a few factors to check your risk tolerance such as your age, time horizon, and the amount of money you will invest. To at least help you out, read books about investing as many as you can, plus there are blogs and podcasts that are free as well.
What are your goals?
Setting goals is one way to know if you are ready for investing. You must first think about what exactly you want in five to ten years – or maybe in a year or so. If, for instance, your goal is mostly short-term, like in three years you would want to have this much money in your bank account, then saving is a much better option for you. It’s probably better to keep your money in a high-yield savings account to take advantage of the maximum interest. But if you are looking into generating funds for the long-term, then you are most likely for investing. Besides, when you invest, you should expect that it’s not going to be quick.
Is investing in real estate now a good idea?
Now, if by investing you mean, investing in real estate, then the answer is yes. Property investment is such a lucrative business because you can always make money out of it. Let’s say, you buy a property you are not ready to move into, you can rent it out to generate income. Property investors are going to have a field day over this because of the government programs designed to help homeowners and investors to spend money on property to help the economy after the events of the past year. So now is a good time to invest.