bordeno
Super Member
Countless people complain about never being able to save money, living from paycheck to paycheck, and being awash in debt. Many are doomed to live out their days this way, never creating any personal wealth in their lives. Contrary to popular opinion, achieving solvency in one’s financial affairs is not only not impossible; it isn’t really that difficult.
The road to financial security is not a short one. It takes time to become rich. One doesn’t have to have a big salary, another misconception. As the reader will see, it’s more about what you keep than what you make. More than anything else, an individual needs three attributes to get his finances going in the right direction: discipline, sacrifice and a willingness to take calculated risks.
Excessive debt is the largest crippler of anyone’s finances. More than anything else, debt keeps one from achieving financial goals. It is a curse, but there is good debt and bad debt. Credit card debt is very bad debt, especially if it is high interest. The first step towards brightening your financial profile is substantially reducing, if not eliminating, credit card debt. Do whatever you have to, to pay them down. Stop using them. Cut them up. Borrow or ask for money from your parents. Restructure through a credit counselor if necessary, but eliminate the strangling effects of credit card debt.
This alone can take some time, depending on how much debt you have. At the same time you’re paying down debt, of course it is critical to reduce personal spending. This is where the elements of discipline and sacrifice enter the picture. After you’ve reduced or eliminated your credit-card debt, you need to make saving money your obsession. You need to reduce your definition of what is necessary and expand your idea of what is frivolous. Before you begin taking any of my suggestions on how to save money, you truly have to WANT to create wealth in your life.
Unless you have a big salary, saving money will probably require drastic lifestyle changes, but its imperative to save money to advance to the next step which is investing.
If you’re renting an apartment, ask your parents if you can live at home for a couple of years for the purpose of saving money. If you own a house, consider refinancing to a lower interest rate if possible. If you have good credit, you can pay off the credit cards with a home equity loan, which is tax-deductible.
If you must drive a car, drive an efficient used car that has good gas mileage and buy the cheapest gas available. Premium gas is a waste of money. Cars are sieves for money; investigate the possibility of commuting by bicycle or public transportation. Both are money saving alternatives to the automobile. Also if there must be a car, buy the cheapest insurance required by law- anything more is a waste of money; insurance is a legalized rip-off. If you have a good driving record, I recommend GEICO. Make sure to reduce your coverage to the legal limit when you get your car paid off, as well. Many people don’t realize they don’t have to carry as much insurance when cars are paid off.
Stop drinking and smoking. Both waste money and are bad for you. Drop cable television if you are paying for it; reduce energy bills by heating and cooling your space less than you are used to. Do not pay for internet service. Reduce entertainment expenses to a bare minimum. Rent movies instead of going to theatres; microwave popcorn costs 80% less than movie house popcorn. Don’t go out to restaurants and bars, eat at home; there’s no need to enter a bar if you’ve stopped drinking. Only buy foods that are on sale; clip coupons for groceries. Buy used clothes to save money; Goodwill Industries is an excellent place to buy used clothes. If you have children, buy clothes at yard sales or consignment shops.
Do not spend one dime on any Lottery, Big Game, Lotto etc. It could be you, but it almost certainly won’t be.
In short, start saving money like a miser. The suggestions above may seem drastic to some, but you must make sacrifices to achieve wealth in your life. Once you are in the habit of saving money and start to see the results, you’ll want to save more and become better at it.
Try to save $7500.00 to $10,000.00. It doesn’t matter if it takes a long time. This is a long process of one step after another. You will save this much money. Only save in the bank until you get to about $2500.00, then put that sum into an ultra-short term bond fund such as the Strong Advantage Fund. It invests in safe short- term bonds, which help the fund yield more than money market funds. It also has no load, or sales charge; never pay a sales charge when buying mutual funds; if you pay a 5% load, it reduces the amount you’re investing by 5%! If you invest $10,000.00 in a no-load fund, you invest $10,000.00. If you invest $10,000.00 into a fund that carries a 5% load, you invest $9500.00. You do have to do some research with no-load funds since you won’t be paying a financial advisor to recommend funds. Research at internet sites such as morningstar.com, msn.money.com and cbs.marketwatch.com; read financial publications such as Smart Money, Kiplinger’s, Mutual Funds and Money.
You’ve cut down your debt, started living frugally and saved $2500.00. You’ve invested that in a mutual fund with very low risk, a short-term bond fund. In order to get to the $7500-$10,000 you’ll need to diversify into stock funds, make a commitment to automatically invest a certain sum monthly into that bond fund. Put as much as you can afford monthly into the fund through automatic withdrawal from your checking account.
Even if it’s only $100.00/month. In doing this you’ll be paying yourself before you can spend the money elsewhere. The more you can contribute monthly, the better.
Once you have saved the amount specified it is time to begin to diversify into stock mutual funds, no-load of course. Over the course of time, stocks return more to the investor than any asset class. Stocks go through up and down periods known as bull and bear markets. Stocks or stock mutual funds are strictly a long-term investment; pay no mind if the value of well-chosen stock investments declines; use this as an opportunity to buy more. Stock mutual funds are merely portfolios of stocks run by professional money managers. With $10,000 to invest, I recommend buying three stock mutual funds rather than individual stocks. The funds allow the beginning investor to diversify (own many stocks) instead of just a few, which reduces risk.
Put $2500.00 each into three different kinds of stock mutual funds. First buy an index fund that tracks the S&P 500, such as Vanguard Index 500. These funds own the 500 largest stocks in America, those contained in the S&P 500 index. They are excellent core holdings. Vanguard is one of my favorite fund families and has extremely low expense ratios, or costs. Secondly I would buy a good solid international fund, which invests in companies all over the world, such as Janus Worldwide, also a no-load fund. With the last $2500 I would take slightly more risk and buy either a small-company fund, an aggressive growth fund or possibly even a sector fund such as a health care fund. Keep in mind that these are all long-term investments.
Continue adding money on a monthly basis to all three funds. Reinvest dividends and capital gains distributions. Keep the bond fund as a savings account or emergency fund. Adding money to stock funds on a regular basis is known as dollar-cost averaging. You invest the same amount each month, buying more when prices are down and less when prices are up. Only keep as much as is necessary to pay bills in a checking account, or write checks from a mutual fund money market account.
Whatever you do, don’t sell your stock mutual fund investments. Do NOT follow the herd mentality and rush for the exits when the stock market is down. That’s the WORST time to sell. If anything, invest more when stocks are cheap. Accumulate when prices are low; watch your worth expand when the stock market recovers due to the wonder of compounding. It may take a long time to recover, but you don’t need this money for a long time. But recover it will; the market has always recovered from periods of doom and gloom and gone on to greater heights. Keep in mind that, since its money that you’re not going to use for a long time, it doesn’t matter if its value goes down for even an extended period.
Opponents of stock market investing say that it is risky and that you can lose money. And yes, it entails risk, but the risk declines the longer the investment is held; as I’ve said many times, stocks are long-term investments. You will only lose money if you sell for less than the price at which you bought. The risks of NOT investing in the stock market are greater, in my opinion. Money left in bank savings accounts will be lucky to beat the rate of inflation; when inflation rears its ugly head again it will lose ground to inflation. The long-term average return of common stocks is about 12%. Banks currently pay around 1 %.
Both my parent’s families increased their wealth significantly by investing in the stock market. I learned about investing from my grandfather. Because of saving and investing I was able to take 4 years off from working to return to school, be at home to raise a baby and change careers.
The steps I’ve outlined are not difficult, but require some discipline and conviction. Almost anyone can drastically improve the outlook of his/her finances if he/ she is willing to make sacrifices. Sacrifice now to enjoy wealth in the future. Invest the time needed to make living from paycheck to paycheck a thing of the past.
Hope this is useful to some of you. I wrote this six or seven years ago for a college paper.
The road to financial security is not a short one. It takes time to become rich. One doesn’t have to have a big salary, another misconception. As the reader will see, it’s more about what you keep than what you make. More than anything else, an individual needs three attributes to get his finances going in the right direction: discipline, sacrifice and a willingness to take calculated risks.
Excessive debt is the largest crippler of anyone’s finances. More than anything else, debt keeps one from achieving financial goals. It is a curse, but there is good debt and bad debt. Credit card debt is very bad debt, especially if it is high interest. The first step towards brightening your financial profile is substantially reducing, if not eliminating, credit card debt. Do whatever you have to, to pay them down. Stop using them. Cut them up. Borrow or ask for money from your parents. Restructure through a credit counselor if necessary, but eliminate the strangling effects of credit card debt.
This alone can take some time, depending on how much debt you have. At the same time you’re paying down debt, of course it is critical to reduce personal spending. This is where the elements of discipline and sacrifice enter the picture. After you’ve reduced or eliminated your credit-card debt, you need to make saving money your obsession. You need to reduce your definition of what is necessary and expand your idea of what is frivolous. Before you begin taking any of my suggestions on how to save money, you truly have to WANT to create wealth in your life.
Unless you have a big salary, saving money will probably require drastic lifestyle changes, but its imperative to save money to advance to the next step which is investing.
If you’re renting an apartment, ask your parents if you can live at home for a couple of years for the purpose of saving money. If you own a house, consider refinancing to a lower interest rate if possible. If you have good credit, you can pay off the credit cards with a home equity loan, which is tax-deductible.
If you must drive a car, drive an efficient used car that has good gas mileage and buy the cheapest gas available. Premium gas is a waste of money. Cars are sieves for money; investigate the possibility of commuting by bicycle or public transportation. Both are money saving alternatives to the automobile. Also if there must be a car, buy the cheapest insurance required by law- anything more is a waste of money; insurance is a legalized rip-off. If you have a good driving record, I recommend GEICO. Make sure to reduce your coverage to the legal limit when you get your car paid off, as well. Many people don’t realize they don’t have to carry as much insurance when cars are paid off.
Stop drinking and smoking. Both waste money and are bad for you. Drop cable television if you are paying for it; reduce energy bills by heating and cooling your space less than you are used to. Do not pay for internet service. Reduce entertainment expenses to a bare minimum. Rent movies instead of going to theatres; microwave popcorn costs 80% less than movie house popcorn. Don’t go out to restaurants and bars, eat at home; there’s no need to enter a bar if you’ve stopped drinking. Only buy foods that are on sale; clip coupons for groceries. Buy used clothes to save money; Goodwill Industries is an excellent place to buy used clothes. If you have children, buy clothes at yard sales or consignment shops.
Do not spend one dime on any Lottery, Big Game, Lotto etc. It could be you, but it almost certainly won’t be.
In short, start saving money like a miser. The suggestions above may seem drastic to some, but you must make sacrifices to achieve wealth in your life. Once you are in the habit of saving money and start to see the results, you’ll want to save more and become better at it.
Try to save $7500.00 to $10,000.00. It doesn’t matter if it takes a long time. This is a long process of one step after another. You will save this much money. Only save in the bank until you get to about $2500.00, then put that sum into an ultra-short term bond fund such as the Strong Advantage Fund. It invests in safe short- term bonds, which help the fund yield more than money market funds. It also has no load, or sales charge; never pay a sales charge when buying mutual funds; if you pay a 5% load, it reduces the amount you’re investing by 5%! If you invest $10,000.00 in a no-load fund, you invest $10,000.00. If you invest $10,000.00 into a fund that carries a 5% load, you invest $9500.00. You do have to do some research with no-load funds since you won’t be paying a financial advisor to recommend funds. Research at internet sites such as morningstar.com, msn.money.com and cbs.marketwatch.com; read financial publications such as Smart Money, Kiplinger’s, Mutual Funds and Money.
You’ve cut down your debt, started living frugally and saved $2500.00. You’ve invested that in a mutual fund with very low risk, a short-term bond fund. In order to get to the $7500-$10,000 you’ll need to diversify into stock funds, make a commitment to automatically invest a certain sum monthly into that bond fund. Put as much as you can afford monthly into the fund through automatic withdrawal from your checking account.
Even if it’s only $100.00/month. In doing this you’ll be paying yourself before you can spend the money elsewhere. The more you can contribute monthly, the better.
Once you have saved the amount specified it is time to begin to diversify into stock mutual funds, no-load of course. Over the course of time, stocks return more to the investor than any asset class. Stocks go through up and down periods known as bull and bear markets. Stocks or stock mutual funds are strictly a long-term investment; pay no mind if the value of well-chosen stock investments declines; use this as an opportunity to buy more. Stock mutual funds are merely portfolios of stocks run by professional money managers. With $10,000 to invest, I recommend buying three stock mutual funds rather than individual stocks. The funds allow the beginning investor to diversify (own many stocks) instead of just a few, which reduces risk.
Put $2500.00 each into three different kinds of stock mutual funds. First buy an index fund that tracks the S&P 500, such as Vanguard Index 500. These funds own the 500 largest stocks in America, those contained in the S&P 500 index. They are excellent core holdings. Vanguard is one of my favorite fund families and has extremely low expense ratios, or costs. Secondly I would buy a good solid international fund, which invests in companies all over the world, such as Janus Worldwide, also a no-load fund. With the last $2500 I would take slightly more risk and buy either a small-company fund, an aggressive growth fund or possibly even a sector fund such as a health care fund. Keep in mind that these are all long-term investments.
Continue adding money on a monthly basis to all three funds. Reinvest dividends and capital gains distributions. Keep the bond fund as a savings account or emergency fund. Adding money to stock funds on a regular basis is known as dollar-cost averaging. You invest the same amount each month, buying more when prices are down and less when prices are up. Only keep as much as is necessary to pay bills in a checking account, or write checks from a mutual fund money market account.
Whatever you do, don’t sell your stock mutual fund investments. Do NOT follow the herd mentality and rush for the exits when the stock market is down. That’s the WORST time to sell. If anything, invest more when stocks are cheap. Accumulate when prices are low; watch your worth expand when the stock market recovers due to the wonder of compounding. It may take a long time to recover, but you don’t need this money for a long time. But recover it will; the market has always recovered from periods of doom and gloom and gone on to greater heights. Keep in mind that, since its money that you’re not going to use for a long time, it doesn’t matter if its value goes down for even an extended period.
Opponents of stock market investing say that it is risky and that you can lose money. And yes, it entails risk, but the risk declines the longer the investment is held; as I’ve said many times, stocks are long-term investments. You will only lose money if you sell for less than the price at which you bought. The risks of NOT investing in the stock market are greater, in my opinion. Money left in bank savings accounts will be lucky to beat the rate of inflation; when inflation rears its ugly head again it will lose ground to inflation. The long-term average return of common stocks is about 12%. Banks currently pay around 1 %.
Both my parent’s families increased their wealth significantly by investing in the stock market. I learned about investing from my grandfather. Because of saving and investing I was able to take 4 years off from working to return to school, be at home to raise a baby and change careers.
The steps I’ve outlined are not difficult, but require some discipline and conviction. Almost anyone can drastically improve the outlook of his/her finances if he/ she is willing to make sacrifices. Sacrifice now to enjoy wealth in the future. Invest the time needed to make living from paycheck to paycheck a thing of the past.
Hope this is useful to some of you. I wrote this six or seven years ago for a college paper.
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