Finance at your Fingertips by Moses Ayiku, Jr. MBA OP/ED
Pre-Investors, How Do You Clean Up Your Finances And Prepare To Invest? Part 2
Last week we discussed the different type of investors and the issue of an investment profile. It struck me during the week that when it comes to pre investors, they are a group that not much is said about them. After all, they can’t invest in the financial markets because of financial constraints. Why bother with them!
Yet, it seems to me that those in the financial markets could actually make more money if they invested in supporting or guiding pre-investors to become investors at an increasing rate. A pre-investor is simply someone who is not able to invest in the financial markets. There are various reasons for why such people do not invest. The amin reason is their financial situation. Pre-investors tend to have low-income jobs. When they do have jobs, they are often not stable jobs, and they find themselves out of work easily. They also tend to have lower levels of education and training.
This in turn makes it difficult for them to obtain stable, high paying jobs. Added to all the above, many pre-investors would also tend to have large amounts of debt. This could be loans or credit cards. People are human and it is a reality that some will simply get into debt because of mismanagement of debt. Even when it comes to debt, if someone has a high level of credit card debt that was due to them being unemployed for a long period and using the debt to survive, can that be considered mismanagement? Perhaps not. This week we will look at strategies that pre-investors can use to improve their finances to become investors.
As mentioned above, pre-investors have low incomes. That is the beginning of the financial challenge. This is a situation that can be addressed by concrete actions. Prayers and wishful thinking may not be the best bet for dealing with a low income. Pre-investors can identify for example, up and coming career paths and research the education to get into those professions. A key objective for any pre-investor with limited education is to identify and increase their training and education to make themselves more valuable in the labor market.
For example, someone with a GED, not earning much, can attend a community college and obtain a degree in Information Technology for example. This would open doors for a new career as well as higher income levels! There are a variety of career options available. Pre-investors should google the future careers and projected earnings to determine which careers they may be interested in. If you know anyone in this situation, please encourage them to make a decision to better themselves.
One thing that can hold such people back from trying is fear. This is something that affects all of us in different situations and circumstances. Especially as we get older, we are scared of learning new things. However, being scared does not stop us from trying! We may need gentle encouragement. It takes an effort to move one’s mindset to overcome that fear and try.
The courses out there have so many options these days. From online programs to in person courses, one can find a course that can provide training in weeks or go to a college and take up a 2-year program. Depending on one’s age, one can decide which option to take. Regardless of the option, once it allows a person to move from low income to middle income paying jobs, then the training or education would have served its purpose.
For many low-income people, the debt or financial challenges that they face is directly a result of that low income. Hence, the most important option is to enhance one’s skills to earn more in the labor market. The next major challenge for pre-investors is to get a grip on their finances so that they can eventually have the ability to invest.
One major problem for these folks and many others is that of debt. This is something that we do not often speak about. After all, everyone is entitled to make their own financial decisions. Your financial profile is actually only known by you and those that you choose to share that information with. If your financial profile is negative, meaning high debt that is piling, low credit scores and limited access to credit, chances are, you are not out there advertising this type of financial situation.
Debt can be managed and gotten rid of. Many pre-investors are saddled with so much debt that investing seems like an impossible task. The first step towards dealing with debt is to ascertain the total amount of debt that one has. How can you solve a problem if you do not have all the details? By approaching all creditors, one can obtain accurate information about all debt owed out there. The tricky thing about debt and financial profiles is that everyone has a different one. The reason one person is in debt may not be the reason another person is in debt.
One person for example could be in debt for mismanaging their finances. A common source of mismanagement is using credit cards for example to live beyond one’s means. Another person could be in debt due to health problems and related bills. There are people out there going through cancer survival and other challenges. From what I have heard, the bills for these treatments are very expensive and due to our medial system, the financial burden can be so high that even some who were rich before getting ill, end up being poor and debt ridden after paying those medical bills!
Regardless of the type of debt and why you got into this situation, you can overcome! Find out how much you owe, to whom and the current status of these debts. Each debt must be looked at individually. Compile all the debt and asses each one. Make sure to pull your credit report as part of your information gathering process. There is a ton of information about your debt on your credit report. The sad thing is that pre-investors with high debt, tend to be depressed about their situation and as a result, they do not look at their credit reports regularly. If you know people in such situations, being supportive and encouraging is worth more than gold to such people!
Please know that it is important for all of us to assess our credit reports at least once a year. In fact, if you access your report only once a year, one should be able to get a copy of each of your credit reports from the three major reporting agencies without paying a penny. For those who are on a sounder financial footing, it is still a basic and important step to request for and review your credit reports at least once a year. There are a number of reasons why one should look at one’s credit report.
For one thing, how can you pay off debt if you don’t know who you owe and how much? Due to various processing of debt, ownership may have changed and even the amounts may have changed. Then there is the issue of statute of limitations. Some of the debt that you are worried about may have already been removed from your credit report!
That may not absolve you totally of that debt, but it is worth finding out the current situation. Debt that has been on your file for a while can in most cases be paid off for a much lower amount than the face value. Please note this and identify professionals that can assist you in negotiating some of these debts to give yourself the best possible deal.
One thing I have noticed is that our system is skewed in favor of the creditors. This means that when one is looking for information on debt, you will find that the advice is being provided by interested parties that are not looking out for your welfare as a person in debt! One has to research a lot and read between the lines to determine the most appropriate steps to take to get out of debt. There are so many different options and plans. Try and develop your plan for getting out of debt. Once the debt begins to decline, it could free up more income for you to eventually move from the pre-investor stage to the investor stage!
Please feel free to share with me your questions and experiences on stocks and investments. I will do my best to respond, and, in some cases, I will write on some of these questions.
Your questions and comments can be sent to localtalknews@gmail.com.
