How to Decide the Amount of Your Investment. Articles | Personal Finance

Many people, who are investing for the first time, feel that they should put in all their savings into their new investment plan. This is not quite true. To decide how much money you should invest, you should first be aware of how much you can spare, or afford really, to put away for your new investment program. You should also give it a serious thought, as to how much you would like this money to grow and within what period of time. This way you will be able to know what your financial goals are. Only then can you decide how much you should put in for your investments.

Let us first take a look at how much money you have which you can spare at the moment for your investments. Do you have enough savings? If yes, then it is great news. Be that as it may, your investments do not mean that you are stuck somewhere with all your money being blocked in some investment. Remember the reasons for which you were saving, in the first place.

To start with, keep at least 3 to 6 months’ running expenses, which you need to live, stashed away in your savings account which is readily accessible. Do not touch that money for your investment. Never put in any money in investment which you might need at short notice in the immediate future. Remember investment money is going to be blocked for some time.

So to start the exercise of calculating how much money you can invest, you need to look at your savings account carefully and see how much you can really draw from this account for investing purposes. It is another matter if you have another source of income like an inheritance, which you have in your hands. Other wise, money cut out from your savings is all that you have to put in as investment.

Investment may not mean outflow of money for a single time only. You will have to keep on adding more money for your investment portfolio to grow. If you are currently employed you might count on a part of your salaries in future to be added to your investment plans. The best option is to talk to a financial planner who will help you formulate a budget and help you decide how much money from your future income, you can afford to invest.

The best advice which a financial planner can give you is that he can prevent you from over-investing or under-investing in the future. Usually, you may tend to invest more than you can afford or may invest less that the desired amount to reach your financial goals.

An important point to remember is that in case you run short of money for your initial investment, look for other investment options; but never borrow money which you will put in investment or never touch any money which have not put aside for investment in the first place.