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How Will I Know If I’m Ready To Invest?

Investing is a wealth building strategy you should think about sooner rather than later. But it’s not for beginners. To get off on the right foot, get your financial house in order first.

Emergency fund

Build up savings to secure yourself against the unexpected. Don’t let a crisis put you in debt or force you to sell investments on short notice. Shoot for savings of 3 to 6 months worth of basic living expenses, though you might not need to fully fund it before beginning to invest.

Insurance protections

Catastrophes are bad. Catastrophes without appropriate insurance are even worse. Before directing any money toward investments, be sure you have insurance for your property, your health, and your life.

Debt reduction

It typically doesn’t make sense to put your money at risk when you owe money at high interest. Don’t take on the pressure of trying to invest to earn a higher return than the interest you’re paying on debt. Pay debt down at least the high interest rate stuff before you take up investing.

Goal setting

What are you hoping to afford, and when? Make sure your timeframe is long enough for investing to make sense. There is no guarantee that a particular investment will gain value over any particular time but the more time you can stay invested, the better.

Risk assessment

Be sure you are comfortable with the level of risk involved in making an investment. Backing out later because you got nervous rarely works out well. When you take action, be prepared to follow your strategy and stay invested.

With these points squared away, take heart and get started with investing. You’re in a decent position to take on a reasonable risk to try to help you reach long-term financial goals.