Are You Ready to Start Investing?

A checklist before you start investing.

Have you been told you need to start investing?  It's the best way to build wealth and reach your financial goals. The compound interest will work in your favor and will help you grow wealth.

BUT, only if you're ready.  Most people start investing when they're not really ready.

You are ready to start investing if....

you can say YES to each statement below.

1. You've paid off all high interest debt.

There is no specific % that determines high interest. Some say 8%, some say 6%.  Think credit card debt, personal loans, possibly car loans or student loans, etc…get rid of it before you even think about investing.

The overall average return of the stock market is 10%.  Which is great.  Until you look at your credit card and realize you're paying over 20%.  It makes no sense to invest until you have gotten rid of all your higher interest debt.  Plus, once you're done making all those payments to debt, you'll have a lot more money to invest.

Mortgage debt is okay.  I personally recommend getting rid of all debt except the mortgage.  BUT, if your student loans and car loans are 6% or below and you want to start investing....go for it.

2.  You have a full emergency fund.

You need a 3-6 month emergency fund. Fully funded. If you have a dual income household with 2 stable jobs then a 3 month emergency fund is enough.  If you live on a single income or have less stable income, you'll want a 6 month emergency fund.

Life happens and you might need to use the money in your emergency fund.  If you've got it all invested you won't be able to access it right away.  You need to have an Emergency Fund for when life happens.

3. You have room in your budget to invest.

You want to make sure you can pay all your bills each month. You do not want to go into debt so you can invest.  Make sure you can consistently contribute.  Every paycheck or every month is ideal.

The best way to do this is by using a budget. Make sure investing is part of your monthly budget. You can check out the best budgeting apps if you don't know where to start.

4.  You are in it for the long haul.

Investing is not a short term game.  It's for the long haul.  You only want to invest if you are planning on leaving your money in for at least 5-7 years.  This gives your money time to grow with the magic of compound interest.  It also gives you time to overcome any downturns the market takes (because yes - it will go down sometimes).  

Once you have done these 4 things you are ready to start investing.

Categories: : INVESTING