Why? Think about this. If you are being charged 20% on your loan, the first 20% you make in the stock market brings you to “ZERO” % profit. If you make less than 20% in the stock market, you are actually losing money! It’s a spiral down, that you will never get out of!
Now what if you lose money in the stock market? Not only will you be losing your capital investment (that you could have used to pay off your debt), plus you are being charged 20% at the other end!
Most of you have heard of this. It’s savings for rainy day! You lose your job or have an unexpected expense, you need money to keep going before you are able to get things in order. Typically you would want to have 6 months of savings, however you may want to consider other factors like if you have stable job, you have access to other form of income, you have very little essential bills and most are non-essential (play money).
3. MOST IMPORTANT FOR LONG TERM GROWTH—SPEND LESS THAN YOU MAKE!
Once you spend less than you make month after month, you will start to build up a reserve. Once you start to have surplus and don’t waste it on frivolous things (ok maybe a little bit). You will start to build a reserve. Take this reserve and INVEST IT!