When to start investing: 5 things to help decide if you're ready

Many people try to invest too quickly without getting all their finances sorted first.

Although there’s no rule against this, investing from a financially stable starting point is always best.

This simple checklist will help you decide whether you're ready to start your investment journey, when to invest and whether you have anything left to tick off before exploring your options.

1. Pay off your high-interest debts 

Take stock of your debts, particularly those with high interest, such as credit cards or payday loans.

Consider switching to a lower-interest card or a 0% deal so you can start making more progress in clearing your debt.

Also think about whether you could consolidate multiple cards and start tackling the full amount owed.  

It’s important to prioritise this as any returns you make on investments are unlikely to exceed interest fees on your debt, so there's a chance you may still lose money overall. 

2. Have a three-month emergency fund

Life can be unpredictable, and unexpected bills such as car repairs or home emergencies can quickly derail investment plans.

Build up a buffer equivalent to three months’ worth of your expenses in an easy-access savings account so you can cover any surprise costs. 

It’s also worth exploring your insurance and protection options to cover unexpected events, including illness, injury or loss of income.

This will give you peace of mind as you will have financial support without being forced to sell investments earlier than you want to.

3. Check your pension contributions 

You’re investing already if you pay into a pension. It’s a tax-efficient way of growing your money as you won’t pay tax on the returns.

For starters, check your contribution levels and consider if you can afford to pay more.

Similarly, check if your employer contributes the maximum amount and if you paid more, if they would also contribute a higher amount.

You can contribute up to 100% of your earnings to your pension each year or up to the annual allowance of £60,000 (2024/25).

This means the total sum of personal contributions, employer contributions and government tax relief received can’t exceed the £60,000 annual pension allowance.

Individual circumstances differ so always seek independent advice regarding your pension planning. 

4. Set your financial goals 

Have you got a specific goal in mind when it comes to investing?

Having a purpose makes your investment more tangible and enables you to see the progress you’re making. 

Even if you don’t have a big life goal right now, chances are you might want to save for a house deposit or review how much money you’ll need to save for retirement. 

Most importantly, having financial goals enables you to get started.

Even small steps, such as putting aside a little a week, puts you in control of your financial planning. 

5. Decide on your attitude to risk 

Investing is a long game, and you should be prepared to wait a few years to give your money the best chance of earning decent returns.

The stock market tends to outperform cash, but not necessarily in the short term.  

For this reason, you must understand your attitude to financial risk and how much you would be prepared to lose.

There’s no right or wrong answer to whether you should be adventurous or cautious, you have to decide what’s right for you and your circumstances.  

Final thoughts

Whether you have passed this checklist with flying colours or have more work to do, you might benefit from working with a financial adviser.

If you're searching for a financial adviser, Unbiased can help. There are thousands of qualified advisers on our platform who can help you reach your goals.

Find your next adviser with Unbiased.