Three Must Haves Before Beginning Investment Program

So you are tired of worrying about retirement and figure it’s time to start investing.  You’ve been reading up on the matter and are excited to jump in.  But wait.  Before you make your first stock or fund purchase you should consider a few things first.  First on the list is to eliminate all credit card debt.  I know what you are thinking.  “If I have to get rid of my credit card debt first I may never get started.”  Point well taken.  But consider this, eliminating credit card debt may be the best investment you ever make.  How can that be you ask?  Well let me explain.  Today most credit cards have an annual interest rate of between 12% and 20%.  Say you are a good credit risk and your card is at 14%.  If you pay off that credit card debt you just made a guaranteed 14% on your money.  You don’t think 14% is very good?  Well I’m here right now to tell you if there were another investment that guaranteed a 14% return it would be sold out overnight!  The closest you can get to a guaranteed return is investing in U.S. treasuries.  Billions are invested every day in ten year treasury notes, yielding under three percent as I write this.  That 14% is looking a little better isn’t it?  So make the commitment to control your spending and PAY OFF THAT CREDIT CARD DEBT!  If you need help in that area there are innumerable resources on the net.  Do a Google search and spend some time reading.  There are plenty of free counseling services but watch out for the scam artist trying to capitalize on your predicament.   You might try the non-profit National Foundation for Credit Counseling as a good starting point.

You’ve paid off that nasty credit card debt.  I’m proud of you.  But it isn’t time to pick that first stock yet.  What happens if you get sick or become disabled?  The unfortunate can and does happen to people every day.  In fact medical bills are a leading cause of bankruptcy in this country.  You could be well on your way to a comfortable retirement just to have the whole thing wiped out by illness or accident.  If you aren’t eligible for an employer sponsored plan and full blown health coverage is too expensive take heart.  You can still get high deductible coverage for an affordable cost. For example, in Wisconsin a forty four year old male non smoker can get a policy from WPS Health Insurance with a $5500 deductible and 0% coinsurance for under $93 a month.     Remember the idea here is not to cover every doctor’s office visit, but to keep you from losing it all in case things get ugly.

Now for a quick recap.  The three things you should do before beginning an investment program are:

     1.  Pay off credit card debt.
     2.  Buy health insurance
     3.  Buy long term disability insurance

Once you have all three covered, the sooner you get started investing the better.  The power of compounding is a wonderful thing.  Watch for an up-coming article on starting an investment plan.

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