It is a question that everyone seems to ask – when should I start investing? And while there are no simple answers to most things financial, this one is easy enough to answer.
The simple fact is you should start investing as soon as possible. The earlier you start, the better off you will be, and there is no time like the present. So if you have a 401(k) at work, sign up for it. If you have a job, put money into an IRA and reap the tax benefits and long-term earnings.
Starting early comes with a host of benefits, and time is the one thing that no amount of money can buy. When you start investing early, your money will go much further, and you will reduce the amount of cash you need to invest later on. If you wait even a few years, you will have to put more money aside to make up for the time you have already lost.
Investing early also gives you time to recover from any financial blunders you may make, an important consideration in the age of social media and fake news. Investing money is a learned skill, and it is not uncommon to make mistakes along the way. By starting early, you give yourself time to recover from those mistakes, so you can make sounder decisions with your money going forward.
As you can see, investing early has a host of benefits, but that does not mean you should ignore other aspects of your financial life and put every spare penny in the stock market. Far from it, in fact; there are other financial considerations that are just as important, including paying off high interest debt.
If you have credit card debt or other debts with a high interest rate, paying off those debts should be your number one priority. You can still participate in the company 401(k), especially if your employer provides matching funds, but beyond that debt elimination should be your number one priority. As you pay down that debt and finally pay it off, you can redirect the money you had been putting to that purpose and use it to beef up your investment portfolio instead.
Paying off debt is a vital consideration, but so is building an emergency fund. Making sure you have money set aside for a rainy day or a financial emergency will be key to your finances going forward, so think about how much you will need and make getting it a priority.
Many financial planners recommend having a minimum of three to six months worth of living expenses set aside, and that is a good goal to aim for. Even if it means curtailing your other investments for a time, beefing up your emergency fund is important. Once you have achieved your savings goal, you can resume your regular investing by reallocating the money you had been using to build up your savings.
If you have been wondering when you should start investing, the answer is as soon as possible. Whether you start by building a rainy day fund, paying off your credit card debt or signing up for your 401(k) plan at work, the earlier you get started the sooner you can reach your financial goals.