Whether you think of "investments" as synonymous with "retirement," building a healthy relationship with your finances through investing is something your future self will thank you for—especially when you're looking for a cushion to support your health down the line.
But knowing how or even when to start can be the most daunting part—which is why we asked Sallie Krawcheck, CEO and co-founder of Ellevest, to share her next-level knowledge of the financial world.
"Historically speaking, the best time to invest has been… yesterday," Krawcheck says. "That's because the stock market has had a positive return over the long term, and because of the power of compounding — that is, when the money you've earned has the opportunity to earn more money. But since yesterday has come and gone, start today."
That said, there are four factors she suggests you get in order before you dive right into the world of investments so you can ensure the health of your finances as a whole.
1. Determine How Much You're Making vs. Spending
You won't know how much you can (responsibly) invest if you don't know exactly how your money is netting out each month. To figure it out, sit down and make a list of all your monthly expenses, then compare that list with your income and savings goals.
Once you know what your output looks like, you can adjust your budget to follow the 50/30/20 rule— which dedicates 50 percent of your take-home pay to needs, 30 percent to fun, and 20 percent to "future you" (AKA your savings, investments, and above-minimum debt payments), according to Krawcheck.
And if that 20 percent number isn't quite realistic for you yet, don't sweat it. Start by dedicating as much money as you can to your savings goals, and gradually work your way up over time, Krawcheck suggests.
2. Get Your Employer 401(k) Match
Technically, this one counts as investing advice, "but if you have an employer match, that's free money," Krawcheck says.
If you're already putting money into a 401(k), find out if your company has a match policy and what the maximum contribution is so you can take advantage of the full match. That's still the right move even if you haven't paid off all your credit cards, says Krawcheck.
"Some of the worst financial advice I've heard is to wait to get that match until you've paid off all your debt," Krawcheck says. "But don't wait." Point taken.
3. Pay Off High-Interest Debt
Dedicating money to investments while also paying interest fees is sort of like treading water—you're moving your money around, but not making much progress with it. In order to make the most impact on your savings goals, focus on paying off your high-interest debt before you add an investment payment to the output column of your budget (except if you've got that 401(k) match mentioned above).
"Those interest charges really hurt your bottom line," Krawcheck says. "We usually say to focus on any debts with interest rates over five percent, but definitely those over 10 percent, like credit cards. Pay credit cards off as fast as you possibly can."
4. Build an Emergency Fund
Setting up an emergency fund of three to six months worth of your take-home pay is the final piece of your financial puzzle before you're ready to start investing. Since the money you put into investments will be more valuable the longer you leave it alone to grow, it's important to have a short-term source of liquid savings.
"[Three to six months of expenses] seems like a lot, but set smaller goals," Krawcheck suggests. "[For example,] $1,000 one month, and work your way up. You'll be glad you have it when you need it."