Despite his humble background, Sanjay Shah went on to become one of London’s most successful hedge fund bosses. A number of hedge fund firms make millions every year, but Mr Shah’s story is different. He started his firm, Solo Capital, in quite unusual circumstances. After being laid off in 2007, Mr Shah did not have a lot of money to back his business, nor did he have a colourful Rolodex of clientele. What he did have, however, was guts. He decided to take a bold step and give it shot.

Hedge fund boss and philanthropist(founder of Autism Rocks) Sanjay Shah with his wife Usha.
Hedge fund boss and philanthropist(founder of Autism Rocks) Sanjay Shah with his wife Usha.

Before embarking on what became a very successful journey, Mr Shah was working in various investment banks. His career spanned over a decade. Here are his tips for any aspiring investor.

Sanjay Shah – Budgeting Is the First Step

Regardless of the kind of investment that you want to make, you should first have a solid handle on how much money is coming in and going out on a monthly basis. It is important to ensure that you can afford the investment without teetering on the edge of debt, but it is also a great opportunity to find weak spots in your budget that you can address accordingly. Online money-tracking services like Mint.com can make this task much easier, and help you stay on track in the long term.

“When you know where your money goes, you are in control and can be thoughtful about aligning spending with priorities,” says Carla Dearing CEO of SUM180, an online financial planning service.

Emergency Funds are Very Important

Sanjay Shah says he never spoke about investment to a client without the phrase “emergency fund” popping up somewhere. He says that’s because it is a critical and indispensable part of your overall financial picture. Everyone should have a sizable cushion in the bank to cover life’s little mishaps, and that “should” becomes a “must” when you add investing to the equation. If you don’t have an emergency fund, you have no business investing. The cushion figure that Mr Shah suggests is six times your monthly expenses! If you start saving as soon as you read this blog post, hopefully you will achieve the recommended minimum within a year or two.

Say Goodbye to High Interest Loans

Sanjay says cutting down your expenses as much as possible is crucial in being a successful investor. Having some money to back you up for a few months (in case every source of income stops) will have you well on the way to becoming a savvy investor. However, he also adds that you don’t need to be completely debt free before starting to invest. Most people don’t pay off their homes for up to 30 years, and you wouldn’t want to wait that long before you start a retirement fund. You should, however, pay off your high interest debts, because they are the ones that will drag you down faster than the Titanic.

Contribute to Your Retirement Savings

Retirement savings are an investment. It may not seem like it now, because what you’re funding seems so far away. However, when you reach retirement age, you will certainly realise the benefits of this lifelong investment. Which is why, before you start throwing money at other investment opportunities, you need to invest in yourself. If you don’t have a retirement account set up yet, make that a priority. If you have one currently, take advantage of free, pre-tax contribution opportunities where available, such as matched funds from your employer. Then maximise those contributions, so that you don’t miss a single cent.

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