4 Signs You're Financially Fit To Invest

Are you among the many who are under-investing? The CEO of The Financial Gym sheds light on this issue in her Message from The CEO, emphasizing that while cash provides security, it’s not ideal for high returns. With inflation eroding the value of cash over time, it’s essential to strike a balance between security and growth. At The Financial Gym, we’re committed to getting our clients investing, but there are crucial markers to hit before diving into the investment pool.  In this guide, we’ll explore four key signs that you’re financially fit enough to take the leap into investing. 

Sign #1: You’ve Saved at Least 3-6 Months of Expenses in an Emergency Fund

We always hear that our emergency fund should be 3-6 months of expenses. But what exactly constitutes “expenses”? It’s not just your major bills like rent, utilities, and insurance; it also includes everyday spending on groceries, dining out, and personal care. 

To be financially prepared for investing, aim to have at least 3-6 months of total expenses saved in a liquid, high yield savings account. This ensures that your emergency funds are readily accessible while still earning a return on your money.  

Let’s take a look at a real world example of identifying expenses and calculating an emergency fund. 

Meet Katy: 

Katy, a 28-year-old marketing professional who lives in NYC, understands the importance of financial preparedness, especially in a fast-paced environment like the Big Apple. 

Katy’s Monthly Expenses: 

Fixed Expenses: 

• Rent: $2,500

• Utilities: $150 

• Cell Phone: $100

• Student Loan Payment: $200 

• Transportation (Subway, Uber/Lyft): $200 

• Subscriptions (Amazon, Netflix, Monthly Facials): $100

• Life Insurance: $35

Variable Expenses (Monthly Average): 

• Groceries: $400 

• Dining Out: $350 

• Personal Care: $100

• Retail:$100  

• Miscellaneous Expenses: $100 

Total Fixed Expenses: $3,285

Total Variable Expenses: $1,050

Total Monthly Expenses $4,335

To ensure she’s financially prepared for any unexpected emergencies, Katy aims to save at least 3-6 months’ worth in a liquid, high yield savings account. This allows her to cover everything from rent to groceries without dipping into her investment accounts. 

Calculating Katy’s Emergency Fund: 

To have a three-month emergency fund, Katy would need: 

• 3 months x $4,335 = $13,005

To have a six-month emergency fund, Katy would need: 

• 6 months x $4,335 = $26,010

So, Katy would need to save between $13,005 and $26,010 in her emergency fund, depending on her preference for a 3-month or 6-month cushion. 

Some of us may not know what we are spending on a regular basis so it's also important to track your spending. That way you’re prepared to calculate an accurate amount for your emergency fund. We’ve got you covered on that too! There are several tracking apps to help organize and get an idea of what you typically spend per month! See our BFF approved Budgeting Tools! 

Sign #2: You’ve Paid Off High Interest Debt or Have a Plan to Do So 

Before diving into investing, it's crucial to address any high-interest debt. Take stock of your debts and take note of their interest rates and minimum payments. Consider following the debt avalanche method, tackling the highest interest debt first with additional payments while making minimum payments on the rest. Once the highest interest debt has been paid, follow the same steps until all of your debts are paid off. 

At The Financial Gym, we’re here to help you craft a personalized financial plan and tackle your debt head on. Book a free call to get matched with one of our Certified Financial Trainers to get started on the path to a fully-funded emergency fund and beyond. 

Sign #3: You are Currently Contributing Enough to Retirement 

Investing in your future retirement is paramount to long-term financial security. Ensure you’re contributing at least enough to meet your employer’s match, taking advantage of what is essentially free money for you! Additionally, consider maximizing tax advantages and investment opportunities by contributing to IRAs or Roth IRAs if you do not exceed the income limits.

Sign #4: You Know What You’re Investing For

Before jumping into investing, it’s essential to clarify your goals. Are you saving for retirement,  a down payment on a home, or your children’s education? Each goal may have a different time horizon and risk tolerance, influencing your investment strategy. Be clear about when you’ll need access to your funds and adjust your investment approach accordingly. 

Determining if you’re financially ready to invest involves careful consideration and several factors. While this guide provides a general gauge of your readiness level, the team at The Financial Gym is here to provide personalized guidance tailored to your unique financial situation and goals. 

Ready to take your finances to the next level? 

To get started, schedule a free 20-minute consultation call to speak to a member of our team. We will ask you a few basic questions to get to know you more, walk you through our financial training program steps, and answer any questions you may have. No pressure to join! Need advice quickly? Talk to one of our Trainers on Demand.

Ready to Invest with Confidence? 

We’re introducing FG Advisory, a no minimum asset advisory where you can benefit from a human being managing your assets according to your goals. Our approach considers your journey with us, ensuring that your investments align with your personalized financial plan. We’re happy to help you take the next step towards your financial fitness when you’re ready! Find out more about our Investment Advisory here.