Do you find yourself at a business crossroads? As a business owner, you’ll encounter these types of crossroads every time you need to make a significant financial decision. And one such decision might be choosing whether or not to grow your business income through investments.
I have been through this same major life intersection, and as a money mentor, I would highly recommend taking a pause and evaluating your choices. Where you invest your hard-earned cash is entirely up to you, but spending time in solid preparation can help you make a wise and profitable investment.
Here are a few questions to help you get started in this fearfully exciting journey of making investments.
1. What is my financial goal?
Always start with the end goal in mind. Why do you want to invest in the first place? Aside from growing your current income, setting realistic goals could push you further. When you create your goals, make sure that your timeline is specific so you can create a roadmap of how your investment will help you reach your goal. An example of a financial goal might be: By 2030, I will have fully paid my business mortgage.
2. How much risk should I take on?
Making significant business investments will put you face-to-face with a given level of risk. In a typical financial discussion, short-term investments promise smaller interest, while long-term investments yield higher interest. The timeliness of the investment depends on your financial goals, so decide according to your plan.
3. Can I make a mixed investment?
It is possible to invest in all types of available and reliable investment opportunities. Once you have set your goals, you can decide how much you will put in short-term, mid-term, or long-term investment portfolios. If you’re feeling a bit undecided since this is hard-earned income, after all, don’t hesitate to consult with a financial expert so you can make an informed decision.
4. Where do I put my investment?
This is related to question #3. As you consider investing, it is wise to make a diversified plan. Don’t put all your eggs in one basket. Conduct thorough research of the stocks, businesses, or individuals you want to grow your money in. Ensure that these are reliable sources so that you can manage the risks involved.
5. How will this decision impact my inner business circle?
As you make investment decisions, it is also crucial to consult with your immediate circle. This could be your significant other, family, parents, or business partners. Your decision always generates a consequence. Ensure that they are aware of the possible outcomes and if they’re willing to take the risk with you. If you don’t get complete support, you might want to reconsider your choice.
6. Can I reverse my investment decision?
It is also essential to ask yourself if you will be able to change your mind or take back the money you have invested. If the unexpected happens, it would be helpful to know if the company or business you’re investing in will allow you to back out. But even if that isn’t an option, you will fully understand the terms and conditions of the investment you’re making.
7. Do I have an emergency fund?
While you get serious about making investments, don’t neglect to build a solid emergency fund. With the pandemic, we know firsthand how unpredictable our circumstances can be, and situations such as job loss can occur outside our control. As a rule of thumb, your emergency fund should total at least six months of your regular earnings. So, if you’ve been earning $2,000 per month, aim to save at least $12,000 in your trusted bank.
Closing words: Are you ready?
There is no easy way on the path to wisely handling your finances. But by doing your research, you can move confidently toward investing into growing to grow your business. Whether you’re looking at large or small investments, here is one more question to consider carefully consider: Am I ready?
Truth be told, there is really no perfect time when you’ll be exactly ready to start investing. For many of us, we made that first investment because we have to. As business owners, we take risks because we need to get something done. However, major investments require time for evaluation. Wherever point you’re at in this major crossroad, always know that help is available.
This article was written by Sharita Humphrey and originally appeared on Score.