Why investing stresses you out #2

Why investing stresses you out #2: Starting Without a Solid Foundation

In early 2020, I was finally ready to invest:
I had a brokerage account.
I understood index funds.
I had my investing strategy.

Unfortunately, I skipped a step: Building a solid financial foundation.

No clear emergency fund.
No buffer for unexpected costs.
No real system for handling irregular expenses.

So when the market crashed 32% just weeks after I started…
I panicked.

Not because I didn’t believe in long-term investing.
But because I had no margin for error.

What if I lost my job?
What if I had a surprise expense?
What if my rent shot up or a family member needed help?

That stress wasn’t coming from the market.
It was coming from me - from my lack of preparation.

Fortunately, the worst didn’t come to worst and I stuck with my investments.

Lesson learned.

A solid financial foundation means:

• You can handle the unexpected without panic
  

• Your investing strategy doesn’t rely on luck or timing
  

• You stay the course even when things get rough

Here’s what I wish I had in place before I started:

1. An emergency fund:
   At least 3-6 months of core expenses. I personally aim for 12 months.
   

2. A cash buffer for irregular costs (This is the one most people forget):
   Think taxes, annual insurance premiums, travel, gifts, dental work, etc.
   

3. A monthly spending system:
   Not a strict budget. Just a way to track where my money goes, so you're not flying blind.

It’s easy to get excited about investing and skip these steps.
But when markets get bumpy - and they will - these are the steps that make all the difference.

They give you stability.
They give you confidence.
They give you options.

Without them, investing becomes one more thing to worry about.

With them, it becomes a tool for building the life you actually want.

Actions:

1) How many months worth of expenses do you have covered ?

2) What irregular expenses do you need to factor in ?

3) If you lost income, what are your necessities (can’t cut) ? How much can you decrease spend (if you have to) ?

You might need to build up your Emergency Fund before beginning to invest.

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Next week we’ll talk about Investing the right amount.

One more thing, if you missed last weeks’ edition (Why investing stresses you out #1: No Clear Why), you can find it here

The information contained in this newsletter is for general informational purposes only. It should not be construed as financial or investment advice. Please consult a qualified financial advisor before making any investment decisions.