1. You must have at least six months' worth of expenses in your savings account. That means if your average monthly expense is $2,000/month, you must have $12,000 in savings before you start investing. In the unfortunate event you owe your primary source of income (for example, your job), your savings will give you a buffer of six months to find another one.
2. You must have insurance. Get yourself accident, hospitalization and life protection before you start investing. You and your family will be taken care of it anything happens.
3. Design the lifestyle you want and find out how much it costs. A more decadent lifestyle your investment goal will be larger and harder to achieve. Once you have your investment goal, use a financial calculator to calculate how much you need to set aside every month for your investments.
4. Always pay yourself first. Instead of spending your money and seeing how much you have left and the end of the month, put aside you monthly investment deposit first and just spend the rest. Income - Savings = Expenses
5. Always continually seek to increase your cash flow. Work for promotions and pay-raises at your job or build a second source of income. The more income you make and can put aside for your investments, the faster you will reach your investment goal.
6. Never borrow to invest. Leverage increases your gains when you win, but also greatly increases your losses when you lose. If your investment turns sour and you can't afford to repay your debt, you could lose everything! Never gamble on your personal or family's financial security just to make an extra buck.
7. Once you have your finances in order, start researching for great companies to invest in. Although you set aside a monthly amount for investments, it doesn't mean you need to enter the market every month. Setup a brokerage account, continue to build up your investment fund and only invest when you spot a great, undervalued deal.
8. Continue to compound your investment returns and build your wealth! Keep setting aside a monthly amount for your investments and instead of spending your dividends, reinvest them in great, undervalued stocks. Hold your winners and watch your wealth grow and grow for the long term.
Adam Wong is from 8 Investment Pte Ltd. Adam is the bestselling author of the Internet marketing book — Lucky Bastard!, which hit the Sunday Times’ Top 10 Bestsellers List.
In July 2010, he was featured on US national television on The Balancing Act, as a guest author. The Balancing Act is a US lifestyle morning show and it attracts a nationwide audience of over two million people daily.