Wondering if you're ready to start investing? There are a few things you should check off your list before you start.
Number one: I want you to pay off any high-interest rate debt you have before you do anything else. So no passing go, no collecting $200 until you've ditched the debt. We're talking about credit cards or double-digit interest rate loans here.
Number two: You need to make sure you have a enough money saved in case of an emergency, the old emergency fund. It's three to six months' of take-home pay, held in a savings account so you've got it when you need it.
Number three: See if your workplace offers a 401(k) plan, particularly one with matching funds. Now, a 401(k) is a tax-advantaged way to save for retirement, so you really want to start there. And if there's a match, try to contribute enough to grab the match and take advantage of what's basically free money.
Number four: I want you to learn the 50/30/20 rule. That means 50% of your take-home pay goes to needs like your rent, the clothes you need for work; 30% of fun, because you have to have fun; and 20% to Grandma You. That's for saving and investing.
Now, if you can't make that math happen right away, that's okay. Starting slow with investing is fine. It's all about making it a habit. Try investing 1% if that's all you can, or 5% now and then increase it in the future when you get that raise.
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The practice of investing a fixed dollar amount on a regular basis does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.
The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.
The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.
Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.