When it comes to your financial goals, building and maintaining an emergency fund should only be second after paying your bills. Figure out how much you want to save and set aside your extra money each month until you hit that amount. Then you can focus on the investment. And don’t forget to replenish your emergency fund every time you use it so it’s ready for the next time.
2. Pay off high-interest debt
High interest rate debt can cost you more than what you could earn with the best investments, so if you do have it, you should pay it off before you think about investing. After building up your emergency fund, spend all of your money on paying off your debts. Make at least the minimum payment on each of them, then put the extra money you have on the debt with the highest interest rate first. When this is paid, go into debt with the next highest interest rate, and so on.
You don’t have to pay off all of your debt before you start investing. Mortgages, for example, have low interest rates, so there is nothing wrong with investing while you are still paying off your home. But if you have credit card debt, which can have APRs of 30% or more in some cases, or payday loans, which sometimes have APRs above 100%, paying it off is more important than paying it off. ‘invest.