4 Things You Should Do BEFORE You Invest

You can have the most carefully crafted financial plan, the most dialed-in budget, and the greatest investments, but if you aren’t prepared for when life sends unexpected (and undesired) events your way, the whole thing can get ruined. Getting hurt, losing your job, facing an unexpected financial emergency, or even passing away are the main areas that can derail your financial future. They are also areas that you can protect against.

In my practice, we refer to these as the “Financial Foundations” and after we address your most pressing concerns, it is one of the first things we focus on.

1. Build a Solid Emergency Fund

An emergency fund is your financial safety net. Life can throw curveballs at any time—your car could break down, a medical emergency could arise, or you might lose your job. Without an emergency fund, these situations could force you to dip into your investments or go into debt to cover.

Aim to save at least 3 to 6 months' worth of living expenses in an easily accessible savings account. This will help you cover unexpected costs without jeopardizing your more long-term goals. While there is considerable value in the reality of unexpected costs, many of my clients comment on the peace of mind component and that is worth something.

2. Get an Estate Plan in Place

Estate planning isn’t just for the wealthy—everyone needs a plan (especially if you have children). A basic estate plan typically includes a will, power of attorney, and healthcare directives. These documents outline who will make decisions for you if you're unable to and how your assets should be distributed if something happens to you.

Without an estate plan, the court will make these decisions for you, which most often leads to unnecessary stress and costs for your family. You probably don’t want the state deciding who should care for your children in your absence. It's essential to have everything in place so your financial wishes are followed and your loved ones are cared for.

3. Secure Quality Disability Insurance

Disability insurance is crucial because your ability to earn an income is one of your biggest assets. If you were unable to work due to an illness or injury, how would you pay your bills or continue saving for the future?

Most of the time, the best place to start is through your employer, as workplace disability policies are often affordable and easy to sign up for. However, review the policy to ensure it covers enough of your income to maintain your lifestyle in case you're unable to work for an extended period. It is usually somewhere between 60%-70% of your income. If most of your income comes from bonuses or equity compensation, you might want to consider a larger emergency fund.

4. Get Life Insurance (And Not Just Through Your Job)

Life insurance protects your family financially if something happens to you. Many people rely on employer-provided life insurance, which is a good start, but it’s often not enough. More importantly, if you leave your job or lose it, that policy won’t follow you.

That’s why I typically recommend having your own individual life insurance policy. It ensures that you have protection in place, no matter what happens with your job, whether you choose to leave or are let go. A term life insurance policy is typically affordable and can provide peace of mind that your family will be covered if the worst happens.

Get the foundation in place, and then start building towards a solid trajectory for your finances and your family.