When Do Know You’re Ready to Begin Investing

Before you jump into investing for your short- and long-term goals, it can be helpful to have some foundational financial tasks accomplished. Once you have achieved these steps, you will be in a much stronger place to begin investing.

• Manage your debt. High-interest debt and credit cards will eat away at your ability to make money with investments. Start by paying off your credit cards and eliminate any high-interest debt now.

• Establish a safety net. Unplanned expenses can disrupt your monthly budget and future goals. I suggest most people have three to six months’ worth of expenses in a savings account / emergency fund.

• Don’t leave money on the table. Find out if your company offers a contribution match to your 401(k), or similar plan, and take advantage of it. Many companies will match your contributions up to a certain amount and this is essentially extra money available to you.

• Protect your assets. Understand your renter, auto, umbrella, life, health, and other key insurances and confirm you are adequately protected. A lapse in coverage, or insufficient coverage, could have lasting consequences on your finances.

• Compare tax options. Retirement savings accounts have a variety of tax effects you should learn about before choosing a plan. Understand how tax sheltering and liquidity are “trade off’s,” when comparing Roth IRA, Traditional IRA, and nonqualified accounts.

• Educate yourself. Begin to learn the basics of investing now so you have a foundation to start with when the time is right. Learn about the importance of diversification in investments and the options that are available to help you create a portfolio reflective of your level of risk.

• Identify the right partner. The firm or platform you select for your investments should be one you have researched and feel confident in. Locate a broker or financial firm with a credentialed advisor who can guide allocation decisions for you or allows you to direct those yourself if that is the direction you choose. Take time to understand the firm’s fee structure and what your expenses will be.

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