When is the best time to start investing? The common answer is, “five years ago, but today is a close second.” However, that’s an over-simplified answer. The truth, of course, is far more complex and depends on a variety of factors. But there are some basic rules to follow.
After You’ve Paid Off Your Credit Card Debt
Do you have credit card debt? If so, that’s keeping you from getting ahead, and you should figure out a way to pay that all back before even considering investing in the stock market. You’re paying a higher interest rate than any investment will give you, so get that going and narrow your focus.
After You’ve Figured Out How to Handle The Rest of Your Debt
Is the balance on your student loan debt ridiculously high? Will you be paying it off for the next 25 or even 30 years? If so, figure out how much you’ll be paying each month, and get comfortable with it. You’ll want to start investing even though you have student loan debt, because you really can’t wait 30 years to start making your money earn interest for you.
When You First Get Hired
If you’re just starting a job, you really don’t have a sense for how your salary (or hourly rate) translates into a paycheck. So it’s a good time to sit down with HR and discuss your investing options. Does your company match any part of your contribution? That’s a great way to earn free money. Read and understand the fine print, and put 6% of your income toward the company match. You’ll earn interest, but more than that you’ll earn free money from work, which your future self will thank you for.
When You Get a Promotion
Congratulations! You got a pay bump! Unless you were living at the very edge before, now’s a great time to start investing the difference between what you once made and what you now make. Do it automatically, before you get a chance to see what the promotion looks like in your bank account. If you can live at the same level you’re currently living at, and you’re investing the rest, you’ll be set up for the rest of your life. Really. Just keep investing the pay raises.
When You Get Some Unexpected Money
Did you get a big return from the IRS this year? Or maybe you got some inheritance. However you “found” it, don’t treat it like found money (otherwise if you’re anything like me, it’ll end up back in circulation!). Instead, invest it. Put it toward your IRA. You’ll be glad you did.
When You Have Money Left in Your Account After Your Bills are Paid
Let’s say it’s the 25th of the month. You get paid in a few days, your refrigerator is full, all your bills have been paid this month, and you have a little money left. Go ahead, invest it. That’s a great time to do it.
The first step to making your money work for you is finding money you can invest. The next step is deciding how, and where, exactly you should put your money. There are millions of words written about that, but all of that comes later. The first thing you need to do is find some extra money in order to invest in the first place.
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