I often hear people say “I just want to start investing.”

Everyone hears the scary statistics about the number of Americans who aren’t financially prepared for retirement.

While so many financial gurus are harping on how you need to be investing, it’s not always easy to know where to start.

Here’s where to start.

The Debt Needs to Go

Before you get too excited about investing, if you have debt, it must go.

There’s no reason to earn 8% interest on an investment, while your 25% credit card interest is eating away at everything you have.

So the first step is to get out of debt, with the exception of your mortgage.

Note: There is one exception to this rule. If your employer offers a match for your retirement plan, talk to your finance department and set that up. That’s free money. 100% return. So at least be putting in enough to get that match.

Once your debt is paid off, you’re ready to start investing

Investing for What?

When you hear the term “investing,” you likely closely associate the term “retirement.”

That’s the basic reason to invest.

Since the general rule is that you don’t put money into the stock market if you’ll need the money within the next five years, retirement is your main goal here.

To start investing for retirement, you have two primary options:

  1. Your employer’s plan – This comes in the form of things like a 401(k) or a TSP (Thrift Savings Plan). There are other types of employer options, including options for the self-employed. You can see more on those here.
  2. Your own IRA – An IRA is technically an Individual Retirement Arrangement (not “account”). This is just a tax shelter. It’s how you set up an account, it’s not an actual account. You can set up a brokerage fund for stocks, or buy a mutual fund, or an ETF (Exchange Traded Fund), and any of those can be opened as an IRA.

There are other things to invest for, such as a large purchase (more than five years away), but retirement is the focus of this article. I’m also not covering saving money. Saving money should mostly be meant for an emergency fund and shorter-term large purchases.

So what do you start with? It’s pretty easy. Here are some steps to take…

5 Steps to Start Investing Right Now

Once your debt is paid off, here is the order I recommend to start investing:

  1. Get your employer’s match, but only invest up to what they match
  2. Open an IRA (Roth if you qualify) and buy a balanced arrangement
  3. Max out your IRA – here are the current annual contribution limits
  4. Max out your spouse’s IRA (stay-at-home spouses can still contribute to an IRA)
  5. Max out your employer retirement plan – here are those annual contribution limits

By the time you complete all five of those steps, you should know a thing or two about investing. At that point, after you’ve maxed out everything, you can look into real estate, taxable accounts or business opportunities.

Where to Invest Your Money

If you’ve been reading my blog for a while, you know I prefer to invest in index funds.

You can learn more about index funds here, and about which specific funds to invest in here.

Investing is different depending on your age, so there is no one-size-fits-all answer.

I think index funds can work for every situation, but each situation requires different funds.

There are also plenty of options outside of the stock market if you want to venture out.

This article is only a few hundred words for a reason. It’s easy to start investing. Know the steps I gave above, and after you’re debt-free, you can get started immediately, and you should.

Are you investing right now? What are you investing in? Share below!