Finding Money to Invest

Q.1. How can I set money aside for investments?

Making small adjustments to your spending habits can generate money for you to save or invest. Part of your budget should include funds for saving or investing. There is an old adage “pay yourself first” which means that you set aside a small amount of your pay before you can spend it. This money can go to investments. Another important action is to pay off your credit card debt and other high interest debts first. You will save yourself more money by paying off a high interest debt than you will by saving money at a far lower interest rate.

Q.2. Should I borrow to invest?

Never do anything with your money that you do not understand.  Borrowing to invest is also called leveraging and you need to know what is involved. You should know the true costs of borrowing to see if the benefits will outweigh the costs. One guideline suggests that you should earn back two-thirds of the interest cost on the loan or it may not be worth the risk.

Q.3. What are the dangers of borrowing to invest?

The obvious answer is that you could lose the money you borrowed to invest and would now be faced with a debt. In addition, you will make less money on your investment because you now have interest to pay on the loan you took out to invest.