Pay off your outstanding debt. Before jumping into the investment arena, you should start with getting your current financial situation in order.  This means setting aside money to pay off your outstanding debt (especially credit cards) and build a savings cushion for emergencies. Although it may not seem like it at first glance, paying off a credit card is actually one of the best investments you can make, which is why it should be priority number one.  Keep in mind that as long as you carry a credit card balance, a credit card company has the ability to charge you interest on that balance.  Interest that can exceed 30% a year (Annual Percentage Rate).  That’s a lot of moolah.  Any balance you pay off saves you on paying interest.  Think about it this way.  Let’s say you owe a credit card company a moderate 15% in terms of interest in a year (APR).  Instead of paying that off, you used your money to invest in the stock market.  This means two things:

1)     The money you are using to pay interest to your credit card company isn’t working for you but against you, because it isn’t growing in an investment.

2)     With this interest hanging over your head, you are already operating at a loss before you begin investing.  Any balance you pay off saves you interest, giving you a return on investment equal to your APR, which is usually 15% or higher.  If you aren’t familiar with effects of growing interest, take a look at the credit card section of our site.

It may not make great conversation at a cocktail party, but paying down your debt and getting yourself out of having to pay interest to the man, is the only can’t-miss, sure-thing investment you’re likely to come across.

Building a savings cushion for emergencies. You never know what is going to happen and when you are going to need some extra cash.  Whether you got laid off from a job or you suddenly need to fix that gas guzzler of a vehicle, you need to have cash stashed away somewhere for you to access pronto tonto.  So before you start investing make sure you have saved away some cash in an emergency fund.  Typically, if you are not married, experts recommend that you store away between 4-6 months worth of living expenses in an emergency fund.  This cash has to be accessible (liquid) so you can use it at any time.  A simple checking or savings account will work.