For most of us, trying to figure out investing sounds complicated. It’s not as easy as trying to buy something on the stock market, then sitting around hoping it makes money for you. It takes risks, being patient, and in many cases asking for help. If done right, you’ll not only make money, but reduce your yearly taxes for a while.

Here are 4 steps to consider; some of these are ideas we’ve covered here before, so hopefully if you’re a regular reader you’ll be ahead of the game:

1. Assess Your Financial Situation

If you’ve been here before, you’ve seen some of our articles about the importance of budgeting. We’ve also talked about setting money goals.

The short version of both of those ideas comes down to these factors: evaluating your income; taking care of your expenses; and finding ways to save money, not only in savings accounts but in spending for necessities and other items.

Budgeting is the most important of these three factors. If you don’t know where you stand beforehand, you’ll either spend more money than you should, saving money as opposed to paying down debt, and learning when you can or can’t splurge on something nice, such as a night out for dinner or having a party.

If being able to invest some of your money to hopefully make more money is one of your goals, then it’s important to know how to set proper financial goals. Without having the right information and doing things the right way, you might end up hurting yourself more than you’re ready for. If you want things like new cars, it’s going to conflict with long term financial goals. If you invest without being able to buy healthy food and new clothes every once in a while, your health might suffer and saving money isn’t a better decision. Always take care of your immediate needs before doing anything else.

2. Build an Emergency Fund

There are many financial sites that say everyone should have an emergency fund. They recommend putting away enough money (either in a savings account or somewhere in your house) to cover anywhere from 3-6 months if something happens, like losing your job.

Those are good goals, but it’s not enough. If you have extra change or dollars, putting it away in a container somewhere could come in handy for other things. For instance, what if you got a flat tire? You could put it on a credit card if you have one, but if you had $300 somewhere in the house that might be easier to deal with. That way, your credit card balance won’t go higher, and your tire issue is done with. That goes for many other things; it’s amazing how many things an extra $300 to $500 can help in an emergency.

3. Pay Off High-Interest Debt

We talk often about paying down debt, because debt’s always growing and gets in the way of other things you might want or need.

There are two main things to consider when trying to pay down outstanding debt; interest rates and amount of the debt. Paying off high interest debt ends up saving money because the interest rates are higher than other interest rates might be. Paying off a smaller debt means you’ll have access to more money, which allows you to put more of your funds towards the high interest rate debt.

How do you decide how to do this? You need to look at how much your outstanding debt is and who the debt is owed. If you owe $50,000 on your mortgage but $2,000 on your credit card, it’s smarter to pay off the credit card, which probably also has a higher interest. If you owe $3,000 on one credit card and $1,500 on another card, but the interest rate is higher on the $3,000 balance, if you can make bigger payments on a regular basis it’ll help you in the long run to pay off the lower amount before tackling the higher amount. However, when both or multiple balances are close, always go after the higher APR (annual percentage rate) to reduce your debt faster.

4. Stay Informed and Seek Professional Advice

Unless you’re knowledgeable in investing or paying down debt easier, it never hurts to find someone who’s in the business to talk to about your financial issues. Accountants can help you with some of your issues, but they rarely offer investing advice. Many can help you figure out how to budget your money and offer ways to pay things off.

A financial advisor that only offers advice on that front can help you figure out what the most important things are that you have to keep up with, and possibly still find ways for you to indulge in other ways while still taking care of your debt and investing.

An investing specialist is who you want to talk to if you’re interesting in, well, investing. There are multiple ways to go, which could be bonds, the stock market, and a host of other choices. There’s also the question of risk assessment; are you willing to go for broke or do you want to have your investment grow slowly and be safe?

We hope this article helps you figure out which way to go. It’s always wise to have a plan, whether you end up investing or not.