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Once you have paid off your debt (with the exception of your mortgage), you are ready to start seriously investing.
The only exception for investing before you are debt free is retirement.
It’s never too early to start investing some amount into a retirement account, whether it be through your work’s plan or on your own plan.
Retirement should be an automatic amount that is deducted every month, no matter what.
This is the philosophy: Pay yourself first!
Even if you can only afford $10/month at first, you should be investing something into a retirement account…
This is a quick guide on dumping your debt.
Debt comes in many forms, such as mortgages, credit cards, loans and ways you’ve never imagined.
Nowadays, people find new, innovative ways to get themselves buried in it everyday.
It’s an art really. This brings me to my first point:
Debt is not our friend. In fact, it’s the enemy.
Racking up debt by taking out loans and making minimum payments on credit card bills can ruin your life. Fortunately there are solutions to this problem.
Here’s a little secret…
Unexpected events are some of the only events we can expect.
How do you expect the unexpected? You need a plan.
It’s important to be prepared. Financially, there is one major step to take that can leave you feeling secure.
An emergency fund.
An emergency fund is the most important foundation of your financial health. No matter where you are in your financial journey, having an emergency fund will get you closer to your goals and limit your setbacks.
Using a credit card for emergencies can turn an emergency into a catastrophe. Getting into credit card debt will just create more problems, that’s why we plan for emergencies without credit cards, right?
Let’s start with the basics…
No matter what your beliefs are, I think most of us are pretty familiar with this passage:
“give, and it will be given to you. Good measure, pressed down, shaken together, running over, will be put into your lap. For with the measure you use it will be measured back to you.” (Luke 6:38, ESV)
Giving isn’t only popular among Christians, some other influential figures had been known to have high regards for giving:
“The value of a man resides in what he gives and not in what he is capable of receiving.” – Albert Einstein
And remember, no matter your financial situation, you can always give something…
Once your monthly bills are organized, you can set back and relax.
It just takes a little time to accomplish this and it’s worth the peace of mind.
Don’t be late on your bills because are unorganized.
That is no excuse and the companies that you pay would agree. Get organized! Know what and when money will need to be paid.
There are 3 simple steps…
After you know your net worth, you need to figure out if you are headed in the right direction.
You need to figure out where your money is going. To do this you will need to track all of your expenses. Write down every bill, payment and expense that you pay in a typical month.
Most of the time people spend a lot more than they think they do.
This is why it’s important to…
Determining you net worth is an easy formula, but getting all of the information together may be time-consuming.
It’s worth it.
You need to know you net worth because you need to know where you are starting. If you already know your net worth then you can skip this step.
How do you determine your net worth?
It’s a simple formula…
The most important step to success in anything is the first step. If you don’t begin, you won’t get anywhere.
As we know from Lao-tzu: “A journey of a thousand miles begins with a single step”.
This is the first article in a series on beginning your path to financial success. Always remember that finances often seem more complex than they really are. It’s important to know that you control your financial future.
You can choose to be financially free.
A mutual fund is like a bucket full of multiple different stocks, bonds, securities or a combination that you invest in collectively. When you buy into a mutual fund, you are buying into all of the securities in the fund by making one single investment. It is a great way for instant diversification.
There are different types of mutual funds…
There are stock funds, sector funds, passively-managed, actively-managed, load, no-load, money market funds, balanced funds and that’s just naming a few of them.
This may seem confusing, but if this seems more complicated than you would prefer, there is a simple rule that you can live by…
An index fund is a fund that tracks an index, such as the S&P 500, the Nasdaq 100 or the Dow Jones (the 3 most popular American indexes). So what exactly is an index?
What is an Index?
An index is a representation of a portion of the stock market.
For example: The Dow Jones Index is comprised of 30 companies, these are 30 of the largest and most influential companies in America. So if you were to invest in a Dow Jones index fund, you would be able to invest in a single fund, but that single fund would be invested in all of the companies on the Dow Jones Index.
There are larger indexes, the largest among popular indexes probably being…
The stock market can be scary for new investors, but it’s not quite as complex as the folks on Wall Street want to pretend it is. This brings us to the most basic question about the stock market: What is a stock? A stock is a share of a public company.
What is a “public company”?
There a private companies and there are public companies. Private companies are owned by individuals or by other companies. Public companies are owned by, you guessed it, the public! This is a way to have multiple people contribute to a company financially.
Here is an example…
Car payments are a beautiful thing, aren’t they?
Of course they are…when you are the one receiving them.
When it comes to car payments, you have 2 options.
You can take out a loan, put yourself in debt and pay interest on your monthly payment to a financial institution or you can opt for the better option…
IRAs are great for retirement accounts, but that’s that all!
There are many little-known uses for an IRA to shelter money from taxes.
Normally when you pull money out before retirement, you are penalized with an additional 10% tax, but here are some ways to avoid that extra fee…
First off, an IRA (Individual Retirement Account) is NOT an investment.
An IRA is a shelter for investments. A tax shelter.
In an IRA, you have the options to buy stocks, bonds, mutual funds, money market accounts, CDs and, in some cases, real estate.
The purpose of using an IRA as an investment account to hold all of these securities is simple…
The envelope budget system is an easy budget for people who want/need to physically see where there money is going.
It’s a very simple process; in fact, all you need to get started is a few envelopes.
You will use a different envelope for each category in your budget. When you receive income, you simply put the correct amount in each envelope for that particular category.
It’s a cash system…
Discipline is the difference between financial success and financial failure. Getting disciplined means staying on track and staying focused on your goals. This applies to almost every aspect of your finances.
From budgeting to investing, discipline and sticking to your limits are the most important things, because without discipline, it won’t matter how much money you earn or how much money you invest.
You can earn a million dollar salary and invest regularly, but it you are not disciplined in spending and investing approach, you could lose everything. As far as your budget is concerned, discipline will make it or break it…
Now you should have all your income and all of your expenses for one month. Now it’s time to start telling your money where to go.
To really start getting detailed, you need to ask yourself what the main purpose of your budget will be.
If getting out of debt is the main reason, then the emphasize should be placed on using as much money as possible to pay down debt.
If retirement, investing or saving is your motivation for a budget, then it should be geared towards exactly that. Having strong goals will help you stay on track with your budget.
A budget doesn’t have to be boring. They can actually be fun. Best of all, they are not difficult! When you are getting started you have to know 2 main things to create a budget:
- How much you make
- How much you spend
So let’s start with your income. How much money do you bring in after taxes and deductions? This is called your net income. This is the actual money you have to spend every month. This includes any income you would make in a month.
If you have an irregular income, like people in the commissioned or service industry, then you have two options…
Yes, this is an actual budget that you can create for yourself in less than 5 minutes. An actual 5 minute budget.
It begins, as every budget begins, by writing down your income for 1 month, then write down your expenses for 1 month.
Budgets don’t have to be boring, and this one is so quick, it doesn’t have time to get boring.
You can track your expense for a month to get an idea, or just estimate for this budget.
If you are in the group of people who spend more than their income, which many people are, you will have to eliminate the least important things, until your spending is equal to or less than your income.
Now decide what is important to you…