I think it's important to get your finances right before investing.
Don't get me wrong, investing is the key to securing your financial future. However, if you don't start with the right foundations you could face unnecessary setbacks along the way.
Here's what I think is important to tackle:
Debt
Debt is compound interest working against you. It's best to have as little debt as possible, particularly high interest debt.
If you have credit card debt or a personal loan, the interest rate on that debt is probably higher than the returns you could earn from an investment like shares. It's better to pay that debt down first.
Don't forget, you are repaying your debt with after-tax income, making it an even better decision to repay high interest debt first.
Emergency fund
I believe it's very important to make sure you have an emergency fund set aside before investing.
If you need cash for an emergency you don't want to be forced to sell shares at a bad price.
Imagine a situation where someone had to sell their shares like Altium Limited (ASX: ALU) or Afterpay Touch Group Ltd (ASX: APT) at the end of last year to raise cash, only to see the share values rebound a few weeks later and not benefit.
Set up a regular savings investment plan
Whether you invest in exchange-traded funds (ETF) like Vanguard MSCI Index International Shares ETF (ASX: VGS) or quality individual shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), I think it's important to set up a regular investment plan.
You never know when the best time to invest is, so I think it's a good idea to set aside monthly savings so you can invest every month or couple of months.
Most personal finance experts say it's better to commit saving a certain amount in your budget first, otherwise you may end up spending most of your potential savings.
Foolish takeaway
With good foundations and a savings plan in place, you will have put your investing in a much better position.
