Is now the right time for you to start investing your money? Great question. And while there is no magic age for everyone, there are five boxes you should check before you consider investment.
1. You have an emergency fund.
Absolutely the number one thing you need to do is make sure you can cover any rent/ mortgage, food and necessities for at least 3-6 months should something unexpected happen. If it’s just you and you’re renting, 3 months should suffice. If you’re supporting a family or own your own home, you should aim for at least 6 months.
2. You’ve paid off any high-interest debt.
We’re talking credit cards, student loans, and any other loan with interest rates near or above 3% as a general rule.
3. You have a retirement plan.
Because the day is coming for all of us at some point, having a steadily growing retirement plan is crucial – and the earlier you start the better. Many employers will match a portion of your contribution so you’ll at least want to take advantage of that if it's available to you.
4. Your short-term savings goals are taken care of.
If you’re going to be buying a house, or planning a wedding or big trip in the next 3-or-so years, you don’t want to use your investments to fund those.
5. You’ve considered life insurance.
It’s not a deal breaker, but if you haven’t already, you might want to consider putting some of your cash flow there.
And if I don’t have all of these boxes checked yet?
Everyone’s situation is different! That doesn’t mean you can’t play a part in a healthier, happier, and more sustainable future. One way is to support companies that align with your values. We realize that looking into all the business practices of a company can be a lift, but you can look for B Corps and other social and environmental performance certifications that have already done much of the heavy lifting for you. Another way is to bank with your local credit union. Many give back to the community and they often have higher interest rates for your nest egg than the bigger banks!
Can having too much cash be a problem?
Yes! When you have a large amount of cash, you are actually getting a negative return over the years due to inflation and the low interest rates for savings and checking accounts compared to other investments. Unfortunately, many traditional savings accounts are earning less than 1% every year.
Do I need to start with traditional investments first before I can shift to SRI investing?
No! Sustainable, Responsible, and Impact investing is no longer a luxury. You should still have all the above boxes checked, but if that’s the route you want to take, you can start with as little as $5,000 with Align. Take our questionnaire to see what that looks like for you!
So, we hope this was helpful as you consider dipping your toe into the investing world. Just remember, everyone’s financial situation and investing timeline is different. There are tons of options out there and everyone is going to try to convince you that they are the right choice. Take your time. Think about what’s important to you. And when the time is right, have fun using your dollars to build a future you believe in.