What Is The First Step To Investing?

People often want to know how to get started in investing. They are looking for tricks and get rich quick schemes and ignoring the basics which could easily get them on a path to success. There is much debate on the subjects, but most center around human frailties. If you really want to increase your net worth as quickly as possible, you have to take the best investments available to you:

Pay Off Any Debts In Order Of Interest Rate

For anyone with consumer debt, this is almost always the best investment you can make. If you have any debt that is not tax-deductible and not a trivial interest rate, pay it off first. Even if you have a relatively low interest rate on a loan like 4%, you would have to make a 6% return on any taxed investment just to break even.

If, for example, you have a credit card that you are paying a 20% APR on, then every dollar you invest in paying it off is like earning a guaranteed 30% on your investment. It is mind-boggling why anyone would be putting money in any investment while they still have consumer debt.

While Dave Ramsay might recommend that you pay them off by size, rather than interest rate -- If you truly want to get your debt paid off as quickly as possible, you'll pay them off in order of interest rate. The sooner your balance of debt is zero, the sooner you can start investing money.

Maximize Your 401(k) or IRA Contribution

If your employer matches your 401(k) contribution you should always contribute up to the point to which they match. You are basically earning an immediate 100% return, which can take years to earn in most investments. You're basically getting a 10 year, plus start to your investing on those dollars. Even if they only match partially (many companies only match 50%), you are garnering returns you can't hope to match with no risk.

Additionally, unless the tax-deferred vehicle you are contributing to has stringent limitations (such as a 401(k) without many investment choices), you should put any money you can into the tax-deferred vehicle. Why pay taxes now, when you can wait years to pay them after they have compounded many times?

While these two options may seem "boring" to someone, anxious to get started in the world of investing, they are by far the best first steps you can take into the world of investing.