Three things to do before you start investing

Investing is a lifelong marathon. When you decide to run, you can’t just jump in like Forrest Gump — You have to train. To start, you probably want to set a goal: Are you training for a half or full marathon? Do you hope to run cross-country? (Well then, “Run, Forrest! Run!”)

Next, you’ll want to assess your current fitness level. Can you jog a few miles without getting a stitch in your side, or will you be panting heavily by the end of the block? Just like you’d make a schedule and adjust your diet as a marathon runner, there are key steps to take before you begin investing.

Here’s a starting point:

1. Set your goals.
2. Pay off your debts.
3. Create an emergency fund.

Just think of this as your pre-training pep talk!

If the hardest part of running is putting on your shoes (i.e., getting started), then the easiest part is probably enjoying the runner’s high after the race. Let’s think about that for a moment: What are your goals as an investor? What will you do with all that money?

Do you want to build a snowman buy a home? Become a shrimp boat captain, or a ping pong pro? What do you want in the short, medium, and long term?

This exercise doesn’t need to happen entirely in your head. Try grabbing a piece of paper, or your journal, and see what comes up. We’ve started a sample list here:

My Money, My Goals

If you want to go a step further, you can try estimating how much each goal might cost. How much would you need to save to buy new kitchenware? And how much would you need for a down payment on a starter house? You might want to include a tentative date for each goal — Somehow, it makes everything feel more real.

When you create your list, you might realize that not every goal is attainable. You might have to make a few tradeoffs (#priorities). If you can’t afford designer jeans and a new couch, that’s normal. Everyone has to make some tough choices. Ranking your list can help you decide what’s important to you, and what you can live without.

This process can help you take a step back and remember why you’re investing in the first place. You’re working toward building your future life.

There are two things a lot of people hate: running and paying the bills. While it’s tempting to combine them (as in, running away from your bills), it’s helpful to tackle your debt as soon as you can.

Why is high-interest debt so toxic? Well, the cost of using credit or debt (known as interest) can spiral out of control, potentially leaving you in a worse financial situation than when you started.

Here’s an example:

Say that you want to upgrade to an iPhone SE — The latest model, with 128 GB of storage, costs roughly $450. If you pay with cash or use a credit card (which you pay off in full), then that $450 reflects the full cost to you, not counting taxes, shipping, and maybe an ongoing data plan.

But let’s say you don’t pay your credit card bill in full when it’s due. Maybe you make the minimum payment, or just a little bit more. In that case, the $450 charge can start to balloon. If you make a $50 monthly payment and your credit card company charges 22% interest annually, it would take you 10 months to pay off your debt. By then, you’ll have paid $450 (the price of the new phone) plus $46 in interest. Essentially, you’d pay about 10% more than the sticker price.

The larger the debt, the worst it gets.

Let’s say you put a $5,000 vacation on your credit card. Cha-ching! Again, your credit card company charges 22% interest, and this time you make monthly payments of $200. Here’s the crazy part: That one-week vacation in Cancún? At this rate, it’ll take you 34 months to pay it off. By that time, you’ll have paid an additional $1,749 in interest. (Ugh!) You could’ve gone on another vacation with that amount of money.

So, why try to pay off high-interest debt before investing? Well, because it’s very rare (read: practically impossible) to find an investment that can outpace how fast your debt grows. It’s like Usain Bolt racing against a high-speed train. Sure, he’s quick, but not that quick.

When it comes to running a marathon, high-interest debt is like improving your diet. It’s fundamental to your overall fitness, but it can be hard to make a change. For a lot of people, it can feel overwhelming.

Still, paying off high-interest debt might be the single most important thing you can do now to prepare to invest.

You know those power bars that runners snack on during a marathon? Those are their energy reserves. It’s not like they can eat a chicken salad in the middle of the race.

In your investing journey, you should also have some energy boosts, or cash infusions, on hand. We’re talking about an emergency fund. This is the money you’ll have available if your car breaks down, your new oven catches on fire, or you suffer a serious loss. (Think job loss, ER visit, or dog-eats-your-computer type emergencies.)

What is an emergency fund? For most people, it’s an account where they keep a tidy sum of money, perhaps enough to cover 3 to 6 months of rent and living expenses. (Many people might have tapped into these funds already.) Depending on your living situation and your finances, you might start small and expand it over time — Or, if you’re especially risk averse, you might aim for an even larger emergency fund. You may also revisit whether you have enough insurance coverage. Between health, life, and disability policies, you’ll probably want plans to fit your situation (e.g., whether you have health conditions, how many dependents you have, etc).

Ultimately, in the same way a runner might carry their phone and $20 cash, an emergency fund and insurance policies are there to help bail you out. They function as backup plans. Whatever your approach, it’s good to give yourself a cushion. So, save yourself some power bars.

While everyone can start a marathon from the same point, the same isn’t true of investing. Some of us have bigger hills to climb. Nonetheless, we can all pursue a similar approach to our training: getting shoes that fit, improving our diets, stocking up on energy gels, and going on practice runs.

Even though people will have different finishing times (and some may drop out), it’s all the prep before race day that can help you start off on the right foot.