Without prerequisites, the next steps cannot be achieved. Many people unfortunately start investing without meeting prerequisites for investment. There are things that must be in order before you begin an investment. The followings are from The Bogleheads Guide to Investing and Personal Finance by professionals and scholars in the finance field.
Are you paying your bills on time?
Are you paying credit card bills in full every month? (Be aware that normal interest rates on credit cards are very high, easily higher than 15%. Do you believe your return on investment is higher than the annual 15%? If not, pay off credit card debts first before investing. If carrying credit cards causes you to overspend, use cash or debit cards.)
Do you have the Keepers mindset? (Refer to the first discussion topic about the concept of Keepers mindset. If so, then that means you are well paying off debts in time.)
Is your budget balanced and are you meeting your basic needs? (You need to have a balanced life and meet the basic needs first even if you have the Keepers mindset.)
Do you have an adequate emergency fund? (The Bogleheads Guide to Investing recommend If you are self-employed or work in a profession where layoffs are common, you may want to have as much as years worth of living expenses stashed away. For most people, six months of living expenses is adequate. Keep your emergency fund in an account that is safe and liquid. Bank savings accounts, credit union accounts, or money market mutual fund accounts are all satisfactory.)
Do you have adequate insurance coverage (or plan to have them in time)?
Are you already contributing the maximum amount needed to earn your employees match to the 401(k) retirement plan? (It is important to take advantage of a tax-deferred investment plan first.)
Do you agree with them? Why and Why not? Lets share if you have other important prerequisites before investment.