Am I ready to invest?
Many early and would be investors ask themselves this question as they dive into the dizzying world of personal finance – and they should! It’s easy to get excited about the potential rewards of investing, without thinking of the potential risks: loss, illiquid assets, and complexity. To answer this question for yourself, we recommend the personal financial waterfall approach.
This simple-to-use roadmap shows you the important steps on the way to financial independence: short-term saving, paying off debt, long-term saving, and finally investing. The first stage is having a savings safety net of 3-6 months from which you can cover your living costs should life take an unexpected turn. The second stage is maximizing your employer 401k to get the most out of contribution matching. The third is paying down your high-interest debts on things such as credit cards. Once you have reached the fourth stage your finances will be in pretty good shape, and you are ready for further investing such as an IRA or an individual investment account with OpenInvest.