Enlightenment about investments is gradually increasing, more people are becoming aware that leaving their money in the bank depreciates over time. People are excited to invest their money in profitable businesses that have track records of giving returns on investment. But unfortunately some of these people don't understand financial management especially the low income earners. There's need to understand that before you go into any investments especially the ones that takes long term to be profitable you should understand financial management first.
In budgeting there are basic or necessary expenses like food, rent and essential utilities like electricity. There are also expenses that are not basic but needful, you need your discretion to allocate funds to them. Therefore any allocation of funds from your income that doesn't fall into basic or must do expenses enters into your discretionary funds.
If you want to be investing in Bitcoin, gold, stock or real estate that you will not get profit immediately you need to have a discretionary fund. Example is if anybody's total income equals to their basic or necessary expenses they should forget about investment. There is most likelihood that they will sell their assets prematurely to take care of their basic needs which are essential.
If you want to invest in a long term profitable asset and you don't have a discretionary fund you can do the following. Cutdown on your basic expenses if you can, get a better paying job, get a side hustle, learn profitable skills, do what you can to earn more than your basic expenses.
I think that investing without understanding financial management is a big mistake if one has a long-term investment goal. Just as interest is needed in investing, financial management is also needed to maintain the investment.
Most of the results of people who start investing without their financial plan are contradictory. If someone wants to enter investment, it is important to ensure three aspects: first, whether their basic expenses have been met, whether they have emergency funds, and whether they can be patient.
An emergency fund is very important in investing, if it is not there, the investment can turn into a disaster. If all the money someone earns is spent on meeting their basic needs such as food, house rent, electricity bills, etc., then it is difficult for them to invest. And even if they invest, they cannot hold that investment for long and may have to sell it in case of emergency. So that instead of profit, they will suffer more.
In addition, the characteristic of long-term wealth is that it requires patience and time. It is not something that can be achieved in a day. Not only financial obstacles are the problem of investment, but also mentality is important. . Again, if there is a lack of financial discipline, investment turns into loss rather than profit.
So if you have the mindset or thoughts to invest, you must first put yourself in the right position to invest.