Financial Milestones to Be Achieved Before Investing
It is a myth that you have to be rich in order to invest. It helps, but you can actually start investing with very little money. However, this does not mean that you should do it. There are several financial milestones that you must go through before diving into them.
We recently dispelled the common myth that it takes a lot of money to invest. There are many mutual funds that allow you to deposit for as little as a hundred dollars . You can read more about this myth from the link above, but the bottom line is that there are a few things you must have in order before deciding to use your money to invest in the stock market.
That being said, investing in a 401 (k) sponsored by your employer is another matter entirely. If your company offers a retirement match, it’s like getting free money and you should get it . In addition, before investing outside your employer’s plan, consider the following:
- Save for Emergencies : Have cash on hand to get through tough times. In an emergency, you don’t want to dig into investment accounts. This can mean huge taxes and fees .
- Pay off high interest debt : You should pay off any high interest debt before you consider investing. The interest you pay on this debt is likely to wipe out your investment gains. In fact, financial site Luke1428 goes a step further and invites you to pay off all of your non-mortgage debt .
- Make a financial plan : We all pay ourselves first , which means saving you money before you have a chance to spend it, but you have to have a budget or financial plan. You want to be in control of your money and know what you are doing with it before you put it on the market. You research, learn how to create a basic portfolio , and figure out how it works with your current budget. List your financial goals. Depending on what you are saving on, the stock market may or may not be the best place to store your savings .
- Make sure you are sufficiently insured : don’t skimp on insurance. Of course, you don’t need all the policies under the sun, but you want to be sure that you will be insured in the event of an emergency. We’ve shown you how to determine which size and type of insurance is right for you .
In short, saving for the future is smart, and investing can help you. While you can start with a little money, it’s probably not the best idea until you reach those milestones. You want to have a plan and safety net, and you certainly don’t want to be held back by debt.