5 Times It's OK to Pause Saving and Investing


In most circumstances, saving and investing should be a priority — one of your highest priorities, in fact. And we'd never advise you let short-term situations derail your long-term financial goals. However, there are a few particular times in life when investing shouldn't be at the top of your to-do list.

That's not to say you shouldn't invest; just that you should focus on the particular situation, and how to handle it, before you turn your attention back to investing.

1. You don't have an emergency fund

If you haven't yet built up an emergency fund, your savings should go toward doing so before they go to investments or long-term savings plans. An emergency fund is a form of defense, a buffer that keeps a singular financial issue from becoming a big, ongoing financial crisis.

With an emergency fund in place, you can handle unexpected expenses — like that dental work, or car repair, or emergency trip to help a family member — without depleting your long-term savings or accruing high-interest debt. Before you start investing, save as much as you can each month until you've built up an emergency fund to carry you through those unpredictable times in life. Experts recommend stashing three to six months' worth of salary — the higher your monthly expenses, the more you should save.

2. You have too much unsecured debt

If you are paying off high-interest, unsecured debt and struggling to make the minimum payments, now is not the time to start investing. Instead, you need to get your debt reduced to a manageable size so you can reduce the amount of interest you're paying. Otherwise you may end up losing money; if you're investing money in something with a 10 percent return, but you're paying a 21 percent interest rate on an equal amount of money, you're losing 11 percent each year.

Focus your savings efforts on a credit card debt reduction plan, such as the snowball or debt ladder method. If you feel that your debt is at crisis level, consider debt consolidation (but use caution when considering your consolidation options) to get it under control.

3. You don't have a dependable income

Perhaps you're starting your own business, just starting your career, or you're self-employed and struggling to keep the monthly income steady. If you're unable to predict what your income will be from one month to the next, you may need to wait on those long-term investments.

Instead, focus on regulating your income or using some smart strategies — such as setting up a slush fund, and having a minimum income budget — to establish stability on a fluctuating income. Once you feel that you have a good financial strategy in place, and can predict the amount you'll be able to save each month, start looking at your investment options.

4. You're in the midst of a financial crisis

It's always better to take a long-term view of the situation, when it comes to finances. However, when you're handling a financial crisis, the most immediate steps are the most important. You need to stop the financial bleeding, so to speak, before you turn your attention to long-term investments. Otherwise, you'll bleed out your financial resources and end up cashing out your investments early, before they can offer you any return.

Therefore, if you're facing a sudden income loss, a potential layoff, a medical or family crisis, or other life emergency that has triggered a financial crisis, deal with the crisis and focus on stabilizing your day-to-day finances first.

5. You don't have enough information

The final reason to avoid investing is less about your financial situation and more about the investment opportunity itself. If you don't have adequate information, don't invest. Instead, take the time to do your due diligence: examine the risks, the potential return, and what the experts say about each investment opportunity.

If it seems like a sure thing, and you're tempted to dump the entire contents of your savings account in, take a step back. Hold a counsel meeting with your financial planner and go over the questions they provide, questions you might not have thought to ask. Once you're confident that you have accurate information and understand the big picture of each potential investment, you're in a position to decide which ones are right for you.

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