Automatically Sock Away That Savings
The absolute first thing that a new investor should do before investing a single penny is too build up an emergency savings account. This account should be equal to 6 months of after-tax income. I spoke of this in a previous article and you may want to jump back and read it.
The Simple Dollar recently posted an article that gives a key technique in building up a savings account. Simply go to a different bank then the one that you currently patronize and open a new savings account. Then, have your employer take 10% (or more) of your after-tax income and automatically deposit that money in your new savings account. You will be far less likely to spend this saved money if it is in a separate account in a separate bank.
As I have said before on this site and in my book, The Confident Investor, if you do not have an emergency fund to fall back on in hard times, you will always be nervous about your investment decisions. Eliminate this nervousness and you start to become a Confident Investor.
Check out the Simple Dollar article – it is worth your time.