If 2020 has shown Americans anything, it’s the importance of preparing for the unexpected.

From an investing perspective, 2020 showed the benefit of being ready to seize opportunity. After all, the stock market has proven to be one heck of an opportunity! Not only has the market recovered all lost ground since the dark days of March 2020, but, it is expected to end this year in record territory–well over 30k on the Dow Jones Industrial Average.

So, as we prepare our New Years’s resolution lists, it’s critical to remember two important things for 2021:

• SAVINGS and,
• INVESTMENT.

Sounds simple, right?

Not exactly. In fact, the investment part can be pretty intimidating for a lot of people.  How many times have people said to me, “I want to invest, but where to I start?”

My advice is always the following, in three simple steps:

1. Make sure you have liquid cash in your bank account

Before you put a dime into the market, make sure you have enough liquidity to weather the unthinkable–an illness, a job loss, and now even, a pandemic.

Typically, 3-6 months of liquid living expenses for an “emergency fund,” is recommended. You’ll want to have enough padding before risking your money in the markets. I repeat…risking your money in the markets. The markets can be pretty treacherous and thus, it’s critical you embrace a long-term approach to your portfolio.

Once your emergency fund money is saved, plan to leave it in liquid. This means it is  accessible and ready to you at any given moment. You want to avoid ever needing to liquidate your market investments, and as such, should aim to keep your money ready and available. For example, if you’re saving for a downpayment on a home? Don’t park that money in the markets.

Some quick advice on liquid savings:

• Keep your savings in an FDIC insured savings account. The interest rate won’t be much (a sign of the times) but, the entire reason for the savings is simply for a “what if” scenario and thus, it’s not money you’re trying to capitalize on.
• If you have more than $250,000 saved, I consider placing your savings in different accounts–or, alternatively–in a fund that parses your money out into multiple accounts. The reason for this is that the Federal Deposit Insurance Corporation will only insure individual depositors up to $250,000 per depositor.

2. Pay off High-Interest Debt

The last thing you want to do is invest in the markets in hopes of an 8% or 10% return –and be stuck paying 22% on an old credit card debt! Granted, there’s good debt and bad debt; good debt is a low-interest mortgage, for example.

Bad debt, on the other hand, is typically credit card debt with high interest rates. Do everything in your power to get rid of those cards and never use them again. I like American Express, for example, since it is paid each month and there’s no interest.

3. Invest

Once you’ve saved enough for emergencies, it’s time to roll up your sleeves and start thinking creatively.

I’m a BIG believer in investing in the market, and although the market can sometimes give us some scary moments, the reality is that over a 20-year period—it’s pretty darn hard to beat U.S. equities. As such, a sound, diverse, responsible portfolio should yield some impressive returns in the long run.

Understand Your Appetite For Risk

If you’re just starting out, determine when you might need your money. If you can afford to put your money each week and not worry about it for the next fifteen or twenty years? GREAT. You”ll be able to take on more risk than someone who hopes to retire in the next five years. If you’ve only got a few years, you’re clearly going to want to be more cautious.

Selecting an Online Broker

Many online brokerage accounts allow you to factor in the risk you’re willing to take and will help you select a portfolio of risk appropriate companies. Some of my favorite platforms include Charles Schwab, Fidelity, Etrade and TD Ameritrade. Many of these are low cost and have helpful research tools available for free to account holders.

For first time investors, I highly recommend SPDRs (Pronounced “spiders.”) These are S&P index funds. SPDR is an exchange-traded fund (an ETF) that trades at one-tenth the value of the S&P. So, if the S&P 500 Index is at 3,700 — SPDR trades at $300. I love these funds because they are low-cost to investors and they’re a great way to be invested in the overall market.

Invest in Yourself and Your Future

The bottomline is: We all need to be invested in our future. A lot of people talk about diets and healthy living in the new year. Health is extraordinarily important and should remain a constant focus — but, so long as you’re making some New Year’s resolutions? Do not forget to think about your FINANCIAL health. Your financial health could ultimately have a major effect on your overall health.

Financial planning gives you peace of mind and some control over your life. It’s important to put one foot in front of the other and just get started.

Happy 2021!