Paycheck Chronicles

Do It Right: Is It Time To Invest?


You may be watching the markets and wondering, "Is it time to invest?" Well, I’ve got no window into what the future holds, but I can give you a framework to answer that particular question.

Determining the answer has little to do with the markets and a lot more to do with you. In this series of articles, I continue to take the position that good timing is more about being able to do something right than any mark on a calendar or a specific age.

If you can answer these four questions with a resounding “yes,” then it may indeed be the right time to invest.

Have You Got Some Cash?

I’m not talking about money to invest, but rather cash set aside in an emergency fund. While I’m fond of the idea of having the equivalent of at least three months of expenses set aside, I don’t think you have to be all the way there before starting to invest. Instead, have some money available to respond to something bad happening without having to use credit. It could be as little as $1,000, but it’s an important step and will help ensure you’re not investing one month only to have to pull the money out the following month because your car broke down.

Are You Double Digit Debt Free?

In most cases, it doesn’t make a lot of sense to direct your limited resources towards investments while you’re carrying a bunch of high-interest debt. No, you don’t have to wipe out all your debts before you invest, but getting rid of 20-something percent debt is an investment in and of itself.

Have You Marked Your Multi-Year Calendar?

Remember, investing is a long term proposition. Money you allocate toward this endeavor should be targeted at goals well into the future — years, not days, weeks or months. And yes, you can ignore those day-to-day news headlines. Your focus should be well into the future.

Do You Have A Plan?

Know how much you’re going to invest and when; I love payroll deductions into the TSP or other employer plan. Know your investment mix; target or lifestyle funds may simplify things on this front. And know your ultimate goals: what are you investing toward?

Look at those questions again. Absent are any references to prospects for the stock or bond markets, news headlines or expected investment returns. Instead, it’s all about you and your situation. If you can say yes four times, there’s a pretty good chance that now is the right time to invest.

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