5 Things To Do Before You Start Investing
If you’re looking for ways to have a comfortable retirement, investing can increase your net worth and even enable you to retire early if you do well. Investing always involves a degree of risk, however, and it’s smart to protect yourself and make sure you have funds in other areas before you begin investing.
David Geithner of On Location Experiences has had both highs and lows in his investments, and if a pro like Geithner has seen volatility in the stock market, you’ll see it as well. Before you start investing, here are some things you should do first.
1. Save Money
As a beginner, you may be tempted to invest the first amount of money you save in the stock market, but doing so isn’t wise. Build your savings account first and be sure to have enough money that you could live on for anywhere between three and six months. Unforeseen events could cause you to lose your job, and you likely wouldn’t be able to withdraw that investment without paying a stiff penalty. Build up a good savings account before you think about investing.
2. Have an Emergency Fund
Having an emergency fund that you never touch save for car repairs or unexpected medical bills is also a smart move. If you do use that fund to pay for an emergency, work on building it back as quickly as possible.
3. Pay Off Your Debts
Before you start investing, it’s crucial to become debt-free. If you have numerous bills and are paying interest on credit card balances, focus on paying those debts first. Then be careful about taking on any further debt. Pay off your credit card balance each month.
4. Invest in an IRA or 401(k) Account
Take money out of your paycheck each month and deposit it in your company’s 401(k) plan. If you don’t have access to a 401(k), deposit money on a regular basis into an IRA. You’ll be saving toward retirement and reducing your tax burden at the same time.
5. Make Extra Equity Payments on Your Mortgage
If you don’t own your own home, work toward saving enough money for a down payment. While it’s a bit costly to initially buy a home, you save money in the long run. Inflation may cause other prices, including rentals, to go up, but your mortgage payment will stay the same.
Once you buy a home, make extra equity payments on that house every month for the first two to three years you live there. Those additional payments shave years off of your mortgage, and you’ll be owning your home outright sooner than you think.
Once you pay off that home, avoid taking out home equity loans. Make it a point to save money for home remodeling expenses so that you can continue to live in your dwelling mortgage-free.
Investing is a great way to build your wealth, but it only works if you’re wise. Follow these tips and you’ll be on your way to a comfortable retirement.
