Want to start investing? Do these three things first.

Are you considering jumping into the market and investing in stocks for the first time? Conventional wisdom says that there are great gains to be made when the market drops like it has recently, but be sure to check these three boxes first:

1 - Fully fund your emergency fund. Significant wealth can be made in the markets, but individual stocks and mutual funds are generally no place for your “just in case” money. Everyone should have an amount equal to at least 6 months of expenses tucked away in a government insured account (savings, money market, CD). Yes, the interest rate will be very low, but the money will be safe. Having this security should be your number one concern in highly volatile times like we are experiencing today.

2 - Take advantage of free money and tax advantaged savings accounts. If you are fortunate enough (to be employed and) to have an employer who matches a portion of your retirement contributions (e.g. a 401(k) match), it’s hard to beat the 100% return on your money when your employer matches your contribution. So you should always, at a minimum, contribute to your employer sponsored retirement plan up to the amount of the match. If you have more available to save, then consider contributing until you reach the contribution limit - $19,500 a year for people under age 50 in 2020.  Invest here before you open a taxable brokerage account because your 401(k) (or other tax advantaged accounts, including IRAs) is tax advantaged - which means, all things equal, you walk away with more because you’ll be taxed less on investments in this kind of account.

3 - Pay off high interest rate debt. If you have debt that has an interest rate of 10% or more, you should pay this off before diverting funds to stock picking. Although you could, in theory, pick the next Amazon or Netflix - stocks that returned huge gains for early investors - it is more likely that you will average 6-10% over time. With the average interest rate on credit cards topping 15%, odds are, you’ll “earn” more by paying off your high interest rate debt. If you start buying stock in a brokerage account before taking these three steps, it’s like trying to run before you crawl.