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This post comes from personal finance blogger and Savings and Sangria reader, Alana Downer. If you’re on the fence about investing, check out Alana’s signs that you’re ready to start investing!

5 Tell-Tale Signs You Are Ready to Start Investing

Most people never invest because they aren’t sure if they’re ready. By avoiding all risks, they let many great investing opportunities slip through their fingers. Other people invest too soon and have terrible experiences that prevent them from investing ever again.

There exists a middle ground where most variables are perfectly aligned. It’s sensible to wonder if the time is right to start investing, rather than jumping in with both feet. Technically, anything can happen. The goal is to recognize when you are truly ready to finally start investing, and minimize your risks by having everything else in order beforehand. Have you set the stage for safe and easy investment?

1. You’re Out of Debt

When you’re in debt, you don’t have as much money as you think you do. If you have $15,000 and $5,000 in debt, you technically only have $10,000. Debt compounds and becomes harder to pay or negotiate the longer it’s allowed to sit still. Before you invest, make sure you don’t have any outstanding debts that don’t come with a scheduled monthly payment, like a mortgage or a car payment. Those debts are good debts and paying them on time in installments can improve your credit score.

Bad debts, like charged off credit cards or any line of credit that’s significantly behind, need to be handled before you officially have disposable income. Any investment income should be disposable income – never invest with the hope that you can use that money to pay off your debts. Nothing is a sure thing, and you don’t want to find yourself in a position that’s ultimately worse than the one you were in before.

2. You’re Covered in the Event of an Emergency

You have money to invest, but what will you do if your car needs new tires tomorrow? What happens if the roof springs a leak or the motor in your fridge dies? How are you going to be able to afford to fix that? What if you suddenly lose your job and need to be able to pay the bills in the interim? You need to have an emergency fund to cover unexpected expenses. If all your money is tied up in investments, there’s no guarantee that you’re going to be able to get it back.

Calculate your monthly expenses, including food. Even if the figure is cut back to bare necessities, you need to know the core of how much money it takes for you to live through a month. Multiply that by three. Make sure you have at least that much money saved before you decide to invest.

3. You Know Why You Need More Money

People invest because they want more money. Great investors who will ultimately become successful know how much money they need and why they need it. Investing for retirement is rather open ended – it’s a lifelong process of investment that keeps you funded in your golden years. Some people invest because they have an immediate goal. They want to start a business or buy property or set up a college fund.

Aimless investing is risky. Trying to get the most you can get the fastest you can get it might lead to impulsive decisions with no longevity. Many people haphazardly approach the cryptocurrency market and have a tendency to see bigger losses than gains. Know how much money you’re looking to get and investigate the safest ways to get that amount of money. Be aware that it may not happen in your preferred timetable.

4. You’ve Researched Multiple Ways to Invest

Don’t get your heart set on a specific type of investment. There are a multitude of ways to invest, and you should research all of them. People who already know that they aren’t good with keeping on top of things shouldn’t choose an investment method or strategy that involves a lot of commitment. Those people should choose something like an app that rounds up purchases and invests spare change on their behalf. It won’t be labor intensive and it requires less thought.

Complex investments, like cryptocurrency, should only be pursued by those who have a wealth of time on their hands. These frequently fluctuating investments need to be constantly monitored. People who invest in fast moving markets need to be available to make decisions at a moment’s notice. They aren’t “set it and forget it” investments, so people who work long hours may not be the best candidates for crypto.

Slow burning investments, like traditional stocks, are great for people who can only periodically pay attention to what’s going on with the market. These stocks are great for people who are trying to find retirement or long term goals. They sit for a while, amass some cash, and ultimately become keys to financial freedom.

5. You Know How Much Help You’ll Need

Casual, low risk investment can easily be managed by someone who is adept at researching and watching. Bigger investments might require some more involvement. You might want to hire a financial planner to help you create a road map to your goals and decide what kinds of investments will work best for you. Anyone who isn’t sure of the best way to find financial success should utilize the help of a professional. Trial and error isn’t the best learning method when your life savings is on the line.

If you’re a highly motivated self-starter, you might be able to teach yourself. Even if you’re armed with knowledge, you’re going to want to create an arsenal of tools to help you. Investors will sometimes download news aggregator apps and specifically set them to filter and display news about the companies they invest in. They also talk to each other on forums and read blogs about investing. Staying abreast can keep you from forgetting any valuable lessons you’ve learned in your quest to become a savvy investor.

Conclusion

Even if you feel like you’re at the apex of preparation, there will always be things you can’t plan for. Nobody really knows the heart of something until they’ve had experience doing it. The same goes for investing. Remember that you’re going to make mistakes – it happens to even the best investors. Be sure to have a recovery plan in mind and always be conscious of the risks you take.

About the author:

Alana Downer is an avid personal finance blogger, a staunch supporter of pursuing financial independence, and an editor at Learn to Trade, an educational resource for the money-conscious. Alana has been sharing her money tips and suggestions online for quite some time, helping her readers manage and increase their wealth. Feel free to reach out to her on @alanadownerLTT.