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4 Important Steps Before You Start Investing

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This Week’s Money Tip: 4 Important Steps Before You Start Investing

“The best time to invest was 20 years ago. The second best is now”

“The best time to invest was 20 years ago. The second best is now”.

What’s the first thought that passes your mind when you see the quote above?

To invest as soon as possible. Right?

But many people misunderstood the quote and directly jumped to invest their money without any preparations. It is the same as going into a war without any armor and protection gear.

If things go south, you will lose most of your hard-earned savings.

Some even end up getting more debt and their finances become worse.

That’s the worst thing we don’t want to happen.

That’s why you have people who experienced things above, telling you not to invest because it is too risky. It is better to keep your money in the bank forever.

It is indeed the safest method, but it limits your money growth potential.

Why do I think everyone should invest?

  • Allow our money to grow above inflation.
  • Build passive incomes by buying assets
  • Leverage our wealth-building journey
  • Potential to have a better retirement

From the benefits above, it is always worth learning how to invest our money.

But before that, we should equip ourselves with some financial defenses first.

With good financial defense, we will not lose our ground even if our investments fail.

Here are the 4 crucial steps to build a good defense before investing:

Pay off all high-interest debts

The definition of high-interest debt is any debt that has an interest rate higher than 5%. Typically, credit card debts and personal loans belong to this category.

So why should we pay these debts first?

Let’s say you have RM10k credit card debt and your credit card debt interest is 15%. At the same time, you have a stock investment that gives you an average 8% return.

Now you have RM10k on hand that allows you to pay all your debts or invest it.

Scenario 1: You decide to pay all your credit card debts. As a result, you will save RM1,500 interest charge from it.

Scenario 2: You invest RM10k in your stock investment. As a result, you may get RM800 in return (stock investment’s return is never guaranteed).

Which one will you choose?

I believe you get the point. That’s why the priority is to kill off high-interest debts.

For debts below 5% like house loans and student loans, no rush to pay them off as you may get better returns for your money if you invest them.

Get a Medical Card

After paying off high-interest debts, you should get a medical card and life insurance.

Medical expenses nowadays are no joke. Even if you have RM50k saved, a surgery or kidney stone removal *touchwood* will use it up instantly.

With a medical card, it helps to cover most of your medical expenses. This will keep you from cashing out your investments.

Build an Emergency Fund

The next thing you need is an emergency fund that can pay 3 months of your expenses.

This is an important step because no one can predict any unexpected expenses.

A saving of 3-month expenses is the standard. If you have no idea how much is your monthly expense, then save up to a 3-month income worth of money.

E.g., if you earn RM5k per month, save at least RM15k before you start investing.

Split 50% of savings into investment

When you have 3-month savings, you can allocate 50% of your monthly savings to invest.

So what about another 50%?

Keep building your emergency fund until you have 6-months worth of savings.

The thicker your emergency fund, the better your money defense.


When you reached a 6-months worth of savings, well done!

You have officially reached the most exciting stage!

Now you can invest 100% of your monthly savings with a sense of security. Because now you are fully equipped with low debts, a medical card, and a 6-month worth of savings.

Let’s recap the 4 important steps before you start investing:

  1. Pay off all high-interest debts
  2. Get a medical card
  3. Build an emergency fund
  4. Split 50% of savings into investment

I can already hear your mind saying, “I have my money defense ready, now what?”

Well, please stay tuned for my future newsletters. Because I will share more about how to invest in stocks soon!

Talk with you again next week.

Your Money Buddy,


Whenever you’re ready, there are 2 ways I can help you:

1) Book a 1:1 Call Session with me if you want to pick my brain, be it finance or any topic you would like to learn from me.

2) If you’re not sure which platform to invest your money, here are 3 platforms that I personally use:

Rakuten Trade – The only brokerage account I’m currently using now to invest in US index funds and Malaysian stocks. Get RM30 worth of RT points if you register & unlock foreign trading with my referral link.

Wahed Invest – The robo-advisor I use to invest in Shariah-compliant US Stocks, mainly HLAL ETF. Get free RM10 if you register a new account with my referral code “markeo1

Versa – My favorite place to save my emergency fund which offers 4% return (until June 2023). Get free RM10 if you register a new account with my referral code “AL9JZJ9H

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