Before You Invest a Dollar, Figure Out How Much You're Actually Allowed to Invest
What is the first investing decision? It has nothing to do with picking stocks.
Overview
Somebody I know is 19 years old with $21,000 sitting in a checking account. The kid wanted to know what to buy. That's the wrong question, but a fair one.
The instinct is to jump straight to stock picking. That's what I did in 2004, unfortunately. The correct first move is figuring out how much of that money is not actually available to invest.
Details
Rent does not care about the market. It's a fixed, recurring, non-negotiable obligation. So are utilities, insurance, a phone bill, groceries, and transportation. Some would add a gym membership; others have expensive sourdough baking habits. Add those up, and the result is a monthly burn rate. Call it $1,800 for a student splitting an apartment near campus.
Source
Originally published at www.fool.com.