When “now” Is Not the Best Time to Invest
Ask a financial professional when the “best” time to invest is and he will tell you: yesterday. Assuming you didn’t start yesterday, the next best answer is today .
This is because difficulty and time in the market (the stock market has historically tended to rise over time, even if there have been periodic pullbacks) are some of the most important factors for wealth creation, writes Roboadvisor Ellevest. The longer you have money in the market, the more time it has to grow (and recover from these random failures).
However, there are a few situations where it is financially more sensible to spend money on something else: “When you’re still working to formulate your financial framework in the first place,” Ellevest writes.
When you need to build your emergency fund
If you don’t have money set aside for an emergency, this should be your top priority. “This security is important because sometimes financial emergencies are practically guaranteed,” Ellevest writes. And your investment is not profitable, meaning you cannot use it to cover extraordinary expenses without any fines or taxes (unless you donate to Roth ).
I would add that if you are worried about losing your job or another major, costly change in your life, it might be worth considering a small reduction in your automatic contributions to create your savings account if you haven’t already. You don’t want to run out of savings if you lose your job and don’t get an immediate replacement.
When You Need To Pay A Debt
Paying off debt is always one of the most difficult financial goals when combined with investing. For example, if you have a large out-of-school student loan in arrears, you might think that this is your most pressing priority and that investing should (and should) take a back seat to pay off. This is understandable, but it also means you might be missing out on years of growth.
Usually it is advised to pay off debt and invest at the same time , without special instructions. Ellevest sees it a little differently. “Paying off debt with interest rates above five percent,” he advises, “historically has cost you more than you would have earned investing otherwise.”
So, for example, if you have credit card debt, prioritize investing more money to pay off than investing them all. This will have a higher payout (because your debt is increasing too).
And we have a lot of tips on how to do it . And if you’re just starting to invest, read this .