There’s this moment a lot of people hit in their 20s or 30s (sometimes later—no shame): you finally feel ready to do something smart with your money. Maybe you’ve paid off a chunk of debt. Maybe you’ve got a little savings cushion. Maybe you’re just tired of watching your paycheck disappear into a black hole of expenses and decide it’s time your money actually works for you.
So you Google “how to start investing,” and suddenly, you’re knee-deep in acronyms—ETF, IRA, 401(k)—and advice that swings wildly between “just buy index funds” and “build a diversified options strategy.” Cool.
Here’s the thing: before you start investing, you don’t need to know how to pick stocks. You don’t need to be rich. You don’t need to have it all figured out. But you do need to know three key numbers.
These three numbers are your financial foundation. They're the difference between investing confidently—and investing impulsively. They tell you how much you can afford to invest, how much risk you can take on, and what kind of timeline makes sense for your goals.
Think of them as the money version of a warm-up: you wouldn’t sprint without stretching (unless you enjoy hamstring regret). So let’s stretch your financial brain a little—no jargon, no fluff, just a smart, straightforward guide to getting ready to invest.
Why Numbers Matter More Than Guesswork
I’ve talked to dozens of first-time investors over the years—some starting with $50, others with $5,000. The common thread? Many didn’t know where their money actually stood before investing. And guess what usually followed?
- Overcommitting and having to pull money out of an investment (often with penalties or losses).
- Getting scared when the market dipped because they didn’t understand their own risk tolerance.
- Feeling overwhelmed and giving up before seeing any returns.
That’s why these three numbers aren’t just “nice to know”—they’re mission critical.
The 3 Numbers to Know Before You Start Investing
Ready? Here’s your investing pre-check:
- Your Emergency Fund Balance
- Your Monthly Cash Flow
- Your Net Worth Snapshot
Let’s break each one down—and why it matters more than you think.
1. Your Emergency Fund Balance
Before you put a single dollar into the market, you need to make sure you’ve got a safety net in place. Investing isn’t a substitute for savings. It’s not liquid. It’s not guaranteed. And if you have to pull money out to cover a car repair or job loss, it could cost you—in fees or in timing.
The classic advice is 3–6 months of essential expenses. For most people, that’s rent/mortgage, groceries, utilities, transportation, and insurance—not everything, just what keeps your life running.
But here’s a more tailored take:
- If you’re single, have a steady job, and low expenses: 3 months may be enough.
- If you’re self-employed, have dependents, or variable income: aim for closer to 6 months.
What counts: Cash in a high-yield savings account or money market account. Not stocks. Not crypto. Not your Roth IRA.
When I first started investing, I had a $1,000 emergency fund and thought I was good. Then I had a medical bill hit at the same time my car needed new brakes. I had to sell off part of my investment to cover the difference—and took a loss, because the market was down. Lesson learned.
2. Your Monthly Cash Flow
Cash flow is the lifeblood of your financial health. It tells you how much you really have to work with each month—what’s coming in, what’s going out, and what’s left over to invest.
And yes, you need to be honest here. That “leftover” number isn’t what you hope you’ll save. It’s what you consistently don’t spend.
How to calculate it: Take your monthly income (after taxes), subtract your fixed and variable expenses (housing, food, transportation, debt, subscriptions, etc.), and see what’s left.
- If you’re in the positive: awesome. You’ve got money to work with.
- If you’re breaking even or in the red: it’s not time to invest—yet. You need to adjust your spending or boost your income first.
Why this number matters for investing: It helps you decide how much to invest, how often, and in what kind of account. If you’ve got an extra $200 a month, maybe that’s your Roth IRA contribution. If it’s $20, maybe that’s micro-investing through a low-fee platform.
Set up automatic transfers based on this number. Investing becomes much easier when it happens behind the scenes. Start small, stay consistent, and grow from there.
3. Your Net Worth Snapshot
Net worth is your financial baseline. It’s the big-picture number: what you own (assets) minus what you owe (liabilities).
This one’s easy to ignore—especially when you’re just starting out—but knowing your net worth gives you clarity and motivation. It also helps you track your progress once you start investing.
What counts as assets:
- Checking and savings accounts
- Retirement accounts (401k, IRA)
- Investments (stocks, bonds, ETFs)
- Property you own (home equity, car value)
- Cash value from life insurance (if applicable)
What counts as liabilities:
- Credit card balances
- Student loans
- Car loans
- Mortgage
- Personal loans
How to calculate it: Total your assets. Total your liabilities. Subtract liabilities from assets. That’s your net worth.
And yes, it might be negative. That’s not failure—it’s information. It tells you where you stand and where to improve.
If your net worth is heavily negative due to high-interest debt (like credit cards), investing may not be the smartest move just yet. Why? Because paying off debt with 20% interest gives you a guaranteed return—better than any average stock market return.
If your debt is low-interest and manageable (like federal student loans), it’s often fine to start investing while paying it down. The key is context—and your net worth gives you that.
So, Should You Start Investing Now?
If you’ve checked these three numbers and feel solid, the answer is probably yes. Even a small start is better than waiting forever.
You don’t need thousands to begin. You just need:
- A small safety net
- A clear picture of your spending
- A sense of your broader financial health
From there, you can choose what kind of investing fits your goals:
- Long-term wealth building? Start with a Roth IRA or your 401(k) if your employer matches.
- Short-term investing experience? Look into low-fee brokerage accounts and index funds.
- Just want to build the habit? Try micro-investing platforms that let you invest a few bucks at a time.
But again—only if your foundation is solid.
Savings Success!
- Open a separate savings account for your emergency fund. Make it harder to dip into for non-emergencies.
- Track your spending for 30 days. You can’t improve what you don’t measure. Apps help, but a spreadsheet works fine.
- Use the 50/30/20 rule as a guideline. Aim for 50% needs, 30% wants, 20% savings/investments—but adjust based on your reality.
- Set up an investing “test run.” Pick a small amount—say, $25—to invest each month. See how it feels. Build the muscle.
- Revisit your net worth every quarter. It’s motivating to see progress, even in small steps. And it helps you adjust your goals.
Start Where You Are—But Know Where You Stand
Investing isn’t just for high earners. It’s not reserved for people with spreadsheets full of stock picks or ten-year financial plans. It’s for anyone who wants to build a little more freedom into their future.
But the smartest investing always starts with knowing your numbers.
Not someone else’s.
Yours.
You don’t have to be rich to invest—but you do need to be ready. And if you take time to understand these three numbers before you start? You’ll avoid common missteps, invest with confidence, and be way ahead of most first-timers.
So pull out your bank statements. Open a spreadsheet. Know your numbers. And then? Let your money start working for you—for real.
