Finance

Financial Moves to Make Before You Put Money in the Market

Updated Jun 14, 2023· 6 min read
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A checklist notepad on a desk next to a laptop showing financial planning charts.

In This Article

Key Takeaways

Building an emergency fund before investing reduces the risk of liquidating investments at a loss during unexpected expenses.
High-interest debt typically costs more than most investments can reliably return, making debt reduction a priority.
Understanding your employer's retirement match is one of the most straightforward ways to maximize available benefits.
Knowing your risk tolerance and time horizon helps you avoid common behavioral investing mistakes.
Setting up the right account types—such as a Roth IRA or 401(k)—can significantly affect long-term tax outcomes.
30–60 min

Summary

18 items · 30–60 minutes

Why Preparation Comes Before Investing

The appeal of putting money to work in the market is easy to understand. But jumping in before your financial foundation is stable often leads to costly mistakes—selling positions early during emergencies, taking on more risk than you can handle, or missing out on tax-advantaged accounts that compound quietly over decades.

This checklist is designed to help everyday Americans work through the fundamentals before committing money to investments. Think of it as a pre-flight check rather than a delay. Completing these steps doesn't guarantee outcomes—no checklist can—but it significantly improves your starting position. For a complementary view of day-to-day financial habits, see our monthly budget reset checklist.

This Is General Information, Not Personal Advice

The steps in this checklist are general financial education and do not constitute personalized financial, tax, or legal advice. Contribution limits, eligibility rules, and account types vary by individual circumstances and change periodically. Always consult a licensed financial adviser, tax professional, or attorney before making decisions that affect your financial situation.

This article provides general financial information and education only. It is not personalized financial, investment, tax, or legal advice. Please consult a licensed financial adviser or other qualified professional before making decisions based on your individual circumstances.

Your Pre-Investment Checklist

Work through each group below in order. Some items may already be in place; others may require a few weeks of focused effort. Use the tools listed to help you complete each step efficiently.

Required

Monthly Budget Spreadsheet or App

Tracks income and expenses so you can identify a consistent, sustainable amount to allocate toward investing each month.

Required

FDIC-Insured High-Yield Savings Account

Holds your emergency fund safely while earning a market-rate return before you begin investing.

Required

Free Annual Credit Report (AnnualCreditReport.com)

Lets you review your credit report from each major bureau for errors that could affect account approvals or borrowing costs.

Required

Employer 401(k) Plan Documents

Outlines match formulas, vesting schedules, and investment fund options available through your workplace retirement plan.

Optional

Brokerage Risk Tolerance Questionnaire

Helps you identify an asset allocation that reflects your investment goals, time horizon, and comfort with volatility.

Optional

IRS Publication 590-A / 590-B

Provides official IRS guidance on IRA contribution limits, eligibility rules, and distribution requirements.

Cash Flow & Budget

Calculate your monthly take-home income and list every fixed and variable expense to confirm you have a reliable surplus before investing. Must
Build or verify a written monthly budget using the 50/30/20 framework or a similar approach so that investment contributions are a planned line item, not leftover money. Must
Review your budgeting strategy to identify any spending categories that can be trimmed to free up funds for investing. Should

Emergency Fund

Set aside three to six months' worth of essential living expenses in an FDIC-insured savings account before directing funds to the market. Must
Keep your emergency fund in a separate account from everyday spending to reduce the temptation to dip into it. Should
If you are self-employed or have irregular income, consider targeting six to twelve months of expenses instead. Nice to have

Debt Review

List all debts—credit cards, personal loans, student loans, and auto loans—with their balances, interest rates, and minimum payments. Must
Pay off high-interest debt (generally above 7–8% APR) before putting significant money in the market, as the interest cost typically outpaces realistic long-term investment returns. Must
Evaluate lower-interest debt (such as federal student loans or a mortgage) individually; in many cases, maintaining minimum payments while beginning to invest can be reasonable—discuss your specific situation with a financial adviser. Should
Review your credit report for errors that could affect borrowing costs before opening new investment-related accounts. Our credit readiness checklist walks through this process step by step. Nice to have

Employer Benefits

Confirm whether your employer offers a 401(k) or similar retirement plan and, if so, whether they match contributions up to a certain percentage. Must
Contribute at least enough to capture the full employer match before investing elsewhere—an unmatched contribution is a foregone benefit. Must
Review your plan's investment options and default fund selection to ensure they align with your time horizon and risk tolerance. Should

Account Setup & Tax Strategy

Determine which account type is appropriate for your situation—a traditional IRA offers a potential upfront tax deduction, while a Roth IRA offers tax-free growth on qualifying withdrawals; income and eligibility limits apply to both. Must
Open an account with an established, regulated brokerage or financial institution and verify it is SIPC-insured for additional protection. Must
Set up automatic contributions—even a modest, consistent amount—to build the investing habit and reduce the temptation to time the market. Should

Risk & Goals Clarity

Write down your primary investment goal (retirement, home purchase, education) and the approximate time frame so that your asset allocation has a clear purpose. Must
Complete a risk tolerance assessment—many brokerages offer these at no cost—to help you choose investments that match your comfort with potential losses. Should
Document your plan in writing so that it serves as a reference during periods of market volatility and helps you avoid reactive decisions. Nice to have

Don't Skip the Emergency Fund Step

Investing money you may need within the next one to three years exposes you to a significant risk: being forced to sell at a loss during a market downturn simply to cover unexpected expenses. Market values fluctuate and can decline sharply over short periods. An emergency fund is not a barrier to investing—it is what makes investing sustainable.

Beware of 'Get Started Fast' Pressure

A common misconception is that waiting to invest costs more than starting unprepared. While time in the market matters, entering with unresolved high-interest debt or no liquidity buffer introduces risks that can set back your financial progress considerably. Take the time this checklist requires—it is part of the process, not a detour from it.

Once you've worked through these steps, you'll be better positioned to explore the practical side of getting started. Our guide on starting your investment journey with less than $500 offers realistic next steps for those ready to make their first move. And to avoid the missteps that derail many early investors, review the common investing mistakes that cost years of progress before committing capital.

Finance Editorial Team is the collective byline for our editorial team and contributor network. Articles published under this byline or an editorial pen name are researched, written, and reviewed according to our editorial standards for clarity, consistency, and independence before publication.

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Disclaimer: The content on this site is for informational purposes only and is not a substitute for professional advice. Always consult a qualified professional for guidance specific to your situation.