Step 1: Pay off your ‘bad’ debt

Before you start investing, it’s important that you first pay off your so-called ‘bad’ debt, like credit cards and store accounts. This is particularly important for debt that has high interest rates as it will cost you more than an investment is likely to earn. Your home loan doesn’t count as ‘bad’ debt because it’s funding an asset, which will hopefully grow in value over time.

Step 2: Do you have a ‘rainy day’ fund?

Once your debt is under control, you need to consider having a ‘rainy day’ fund. Also known as an emergency fund, this is the fund that will help you out when you most need some extra cash. This could be when you are in-between jobs or have an unexpected health expense.

According to financial experts, it’s generally recommended that you save an amount equal to between three and six months of expenses. Put this money in an accessible account so you can get to the money when you need it.

Step 3: Pick a goal, target amount and time frame

Once you have your emergency fund set up, it’s time for you to invest. Decide what it is that you’d like to achieve (your goal). Would you like to top up your retirement investments or set money aside for something special?

Next, decide on your financial target – how much you’d like to have in your investment account. After that, you’ll need to be clear on how soon you’d like to achieve that goal.

Would you like to access that money within the next year, the next five years or in 20 years? That’s an important decision to make, as your timeframe will influence how much risk you can take on. The good news is that there are many free calculators available to help you work that out.

Step 4: Choose your investment funds

The last step is to choose your investment funds. You can do this with the help of a financial adviser or you can use an easy self-investing platform like Sanlam’s Smart Invest. It has been designed to help you make a unit trust investment that is right for your goal, time frame and risk appetite.