Just when you thought you were ready for take-off, there’s one more checklist to go over. Before putting any money in the stock market, your overall finances should be in order, with day-to-day cash flow running smoothly.
Before you start investing, we recommend that you:
It's important to have money set aside for the "unexpected" expenses all of us really should expect. Having three to six months' worth of essential living expenses in an emergency fund provides peace of mind and helps ensure you won't have to cash out an investment at an inopportune time.
- GET OUT OF DEBT
We're big fans of getting completely out of debt, with the possible exception of a reasonable mortgage (one that requires no more than 25% of your monthly gross income for the combination of your mortgage, property taxes, and homeowner’s insurance). If you're carrying a balance on a credit card that charges you 14% interest, every dollar you devote to paying off that debt is effectively getting a guaranteed 14% return! Once you stop compound interest from working against you, it's time to get it working for you.