Pre-Investing Checkist: Do this before you invest

Amy S.
Share via
Email IconLinkedin IconTwitter IconFacebook Icon
If you’d like to start investing, there are some fundamental moves to make before investing in the markets. Reach out to a Money Coach. We’ll get you through this list in no time.

While investing is an important aspect of a healthy financial plan, there are some important things to consider as you get started. Investing is great for the long-term and steady gain of the stock market, but it's also important to focus on other short-term goals, especially since your investments are subject to risk.

If you’d like to start investing, there are some fundamental moves to make before investing in the markets. 

Complete this Pre-Investing Checklist first

Financial Foundations

Make sure you have or are working on the following financial goals. Whether these goals are complete will determine how much you have to put into investments.

✅ Rainy Day Fund: $1,000 - 1 month of expenses in case of unexpected need

A small bucket of emergency money can help you avoid stress during life's unexpected costs.

How much: $500 to 1 month of expenses

Where: This fund should be in a basic savings account connected to your checking

Why: To help you avoid overdraft fees or being short on bills due to a surprise where you need money fast, like a car repair or a forgotten expense. 

✅ Emergency Fund: 3 - 6 months of earnings in high yield savings account

It doesn't have to be fully funded, but it's good to start building this larger cash buffer, which everyone should have.

How much: 3-6 months of income

Where: High Yield Savings Account

Why: In case of job loss or reduction in income 

✅ High Interest Debt: Pay off any debt that has an interest rate above 8-10%

Make sure you have paid off or are on-track with a debt payoff plan to get rid of high interest debt, which is likely costing you more than you'll earn by investing. 

How much: any debt with an interest rate above 8-10%

Why: It'll save you more money in the long run and free up space in your spending plan to put towards investing.

✅ Retirement savings: maximize your employer matching contributions to your 401k, and/or contribute up to the annual limit.

Retirement savings options offer tax benefits that regular investments do not, and your employer may contribute as well.

How much: You can contribute up to $22,500 for 2023 to your 401k, and $6,500 to your IRA (plus more if you are over age 55).

Why: You may get a double tax benefit depending on the type of retirement account, which will put more money in your pocket to use for investing.

✅ Health savings: make sure you’re contributing enough to your Health Savings Account or Flexible Spending Account, if you have them, to cover any medical bills.

Your HSA is a tax-advantaged account that you invest, so the funds can grow tax-free all the way to retirement if you don’t use them.

How much: You can contribute up to $3,850 for self-only coverage and $7,750 for family coverage, and more if you are over age 55.

Why: Your HSA will roll over each year, and can be invested, and used tax-free in retirement, so it's a great addition to your retirement savings. Your FSA can't be rolled over, but it can reduce your tax liability and help ease the burden of unexpected medical costs.

These goals can take time, but it’s important to prioritize them while you are starting to invest. If you can add more money to top off these goals, do that now! If you need help getting set up with these goals, work with a Bolder Money Coach for two weeks free.

Investment Philosophy

Determine cash available for investing. If you have a lump sum to start with, make sure it's money you don't need for 3-5 years. Even if you don't have a lump sum, you can set an amount to auto-invest each month, so use your spending plan to decide how much you can afford.

Define your risk profile. How much are you willing to lose if the investment goes sour? Can you afford to lose the entire amount you've invested? 

State your investment goals. How much do you want to invest, and what expected returns do you prefer? 

Define your loss plan. What will you do when the market drops? Make a plan so when it does happen, you're prepared.

State your investment interests. What sort of things and companies do you value? Where do you want to invest, and why? Do you want to invest for profit, or are you interested in investing in companies and products that you like? 

Want to invest better?

Reach out to a Money Coach. We’ll get you through this list in no time.

Related content