One of the most frequently asked questions financial advisor typically get asked is, “How much money should I have saved up before I start investing?” We’ve asked ourselves this question when we first started building our blog. Should we save more cash or just start investing into the business from the get-go. Investing can be an excellent way to grow your wealth and achieve long-term financial goals. However, before diving into the world of investments, it is imperative to build a strong cash foundation, aka emergency fund. Keep in mind, when deciding your emergency fund savings goal, you have to refer back to your monthly budget. Building a substantial savings cushion of $10k-$15k before investing can provide a strong safety net, peace of mind, and enhanced opportunities for long-term success.

Ask anyone who’s lived long enough, life is unpredictable, and unexpected expenses are bound arise at any moment. By having at minimum $10k in cash saving, you have established a very healthy emergency fund that will serve as a financial cushion in times of need. This fund is specifically designated to cover unforeseen circumstances such as medical emergencies, job loss, or major home or auto repairs. Having an emergency fund allows you to comfortably handle these situations without having to rely on high interest credit cards to bail you out in the short term. CNBC reported this past January that an estimated 44% of Americans cannot afford to pay a $1000 emergency expense from their savings, according to Bankrate’s survey of 1000 correspondents as of December 2023. Ask yourself, are you a part of the 44% of Americans with less than $1000 in savings, if you are, it’s ok, this is your sign to change your financial behavior.

When it comes to investing, it inherently carries risks. Markets can fluctuate, you will always run the risk of lose. This is why we suggest investing in your emergency fund to have as much cash on hand as possible, most financial experts suggest having at least 3-6 months of monthly bills saved as an emergency. Hence why we suggest of setting a goal of at least $10k-$15k, this will typically cover 3-6 months of the average Americans monthly bills. Once you have this substantial savings account, you will feel more confident to start your investing journey, mitigating the potential risk of the market. By having this financial cushion, you can comfortably navigate market downturns without being forced to sell investments prematurely or incur significant losses. It provides you with the flexibility to stay invested for the long term, allowing your investments to potentially recover and grow over time. Having this savings as a back will allow you to be a more calculated investments without solely dependent on the immediate performance of your investments.

Before embarking on your investment journey, it is crucial to build a solid financial foundation. By prioritizing savings, you establish a safety net, protect yourself from unexpected expenses, and position yourself for long-term success. Remember, investing is not a spring, it’s a marathon. There’s no shortcut towards building wealth but there are ways to give you a better launching pad to lead you towards a more financially secure financial future. Don’t compare yourself to others, take your time building your emergency fund, once you do, then you’ll be able to comfortably venture into the world of investments with confidence and peace of mind.