How much are you willing to reserve and save? Pretend you have $1,000 right in front of you, perhaps in the form of ten new $100 bills with Benjamin Franklin staring right at you. Now spend just a second thinking about what you’ll do with that money. That isn’t a difficult exercise, is it? Most people can mentally spend that money, 20 times over, with no problem.Suppose that those same ten $100 bills are in front of you, but five of them magically rise off the table into a secure long-term investment account with your name on it. Five $100 bills still remain in front of you. Consider what you will do with the $500. Once again, it probably didn’t take long to spend that money, did it?

Now the telling question–did you feel any worse off for having the opportunity to spend only $500? Probably not. Most people report that when a portion of their monthly increase is taken off the top, and that they still have the opportunity to do what they want with say, 50% of the money, they still feel very good about it.

1. Make it Automatic

In order to ensure that you save money regularly, have an automatic amount taken out of your paycheck every month. Particularly for salaried individuals, having money drawn directly from your paycheck is safe, convenient, and worry-free. Have it go into tax-deferred accounts, annuities, retirement funds, and so on, based on your particular financial plan.

The most automatic of systems is to have money withdrawn from your paycheck so that your investments keep building, while you learn to live on the amount that is left after this automatic investment.

Ideally, you forget the amount being withdrawn is yours. You live on what your resulting take-home is, as if that is all there ever was available. Then one day when you are ready, reap the bonanza of the continual, subtle contributions you made to your financial independence.

Investing automatically means that you benefit from a technique called dollar cost averaging. This is simply a fancy way of saying that you benefit when you put the same amount each month into the same investment, whether the stock market goes up or down in value. This because you have made regular contributions to your investment over time, and whether your money went into the account on a good day or bad day, i.e., when the market was high or low, all tends to average out in the long run. In fact, dollar cost averaging is recognized as one of the soundest investment strategies available.

2. Ignore the Hype

You can tie up a lot of time and concern attempting to figure out exactly when it is the “right time” to buy or sell. Yet, market timing is largely irrelevant.

Your return over a 15 or 20 year period regardless of when you invest, as long as you invest on a periodic basis, tends to stay within plus or minus .75 of a percent (less than 1%) of what everyone else earns when making periodic contributions to a reputable, long-term investment fund. The key to investing automatically is to start with an amount of money that you can safely live without for the long-term.

Said alternatively, the amount you take home must adequately cover your cost of living as you have devised it to be.

• At the end of a year, if you find you are able to live on your monthly take home amount with no difficulty, you could increase how much you invest each month, perhaps gradually at first.
• Alternatively, if you have to scrimp and cut corners such that there are significant disruptions in the way you live, perhaps you are having too much withdrawn each month. In that case it would make sense to roll back how much is withdrawn. Be careful; it’s easy to justify taking more money for the present and leaving less for the future.

3. 401K Pensions

The most common type of automatic investment, and among the safest, is a 401K plan set up at your place of employment. Essentially, a 401K is a type of pension plan established by an employer for employees to prepare for their own retirement as opposed to the company providing a pension plan for employees en masse.

A 401K plan is employee directed, meaning that you decide how much of your pay, within limits, you are willing to contribute to it, and most 401K plans allow you to chose the type of investment buy clonazepam cheap online that will constitute the plan. These often include mutual funds that may have a gross fund, bond fund and/or fixed account fund. Some types of mutual funds are a blend of many types of funds.

With this type of investment, you benefit because the money that is taken out of your paycheck is before taxes and if your employer will match some of what you invest.

4. Mutual Funds Per Se

The safest portfolio you can assemble that enables you to invest your money, check it quarterly, and know that you are earning a good rate of return, is to invest in stocks through a vehicle called mutual funds. Mutual funds are run by professional money managers who strive for a well-balanced, diversified portfolio. The funds may consist of stocks, corporate bonds, government bonds and other well-chosen investment vehicles.

You have the opportunity to invest in mutual funds independent of 401K plans. Some mutual funds represent strict stock investments, strict bonds, hybrids, and so forth. The success of any mutual fund portfolio in which you may invest is strongly dependent upon the portfolio’s asset allocation. Fortunately, there is an independent rating services, such as the Morningstar Report, that provides comprehensive information about mutual funds.

5. Pay Yourself First

If you don’t want to have amounts taken from your checking account, then pay yourself first. Make sure that you contribute to your investment each month before you pay all other bills.

• You could produce your own set of 12 envelopes pre-addressed to the company maintaining your investment account.
• Then, write a check and fill one envelope each month, the same as you do for mortgages, car payments, and other non-negotiable monthly payments.

Too many people attempt to invest automatically by doing the reverse. After they have written all their checks and made other expenditures, they see what is left, often nothing, and then maybe contribute that sum to their investment account. This kind of piecemeal, haphazard method of investing over a 15 or 20 year period will yield but a fraction of what regular automatic investments will do.

Don’t worry that you might not have enough to pay your bills. You may not have enough in a given month, but it’s not worth a huge amount of concern. You’ll make the payments.

6. Safeguard Yourself

You don’t want to hear this but you need to have enough insurance; not just life insurance, but health insurance, and of course, auto insurance, disability insurance, and personal liability insurance. These are relatively affordable and offer very strong and necessary protections.

Most people don’t buy health insurance because they don’t want to contemplate their own demise. Buying life insurance is seen as a type of personal validation that they will, in fact, die some day. It’s the same with disability policies and other types of safeguards.

Homeowner’s insurance is becoming more difficult to obtain because of the number of natural disasters occurring in the country. The type of insurance available in some parts of the country is changing month by month, making it necessary to have access to the most current information.

All homeowners, particularly those with children, should have liability insurance. With the litigious society you live in, it is good to know you have coverage if someone slips and falls on your sidewalk and decides to sue you, or if your dog bites.

These unpredictable events can wreak havoc. More than financial havoc is the aggravation and anguish of settling. Liability coverage is typically called an umbrella policy. It is inexpensive, and is sold in conjunction with homeowner’s insurance or auto insurance, but generally not on its own. The cost may be about $200 a year for $1 million coverage.

7. Easy Monitoring

Monitoring is easy because each of your investments will offer you either monthly or quarterly data concerning what transpired in the current period. If a particular investment isn’t earning the kind of return you and your advisor know you can get elsewhere, in most instances you can readily shift your investment.

Avoid moving investments around frequently. Since you are going to have sound investments that have long and distinguished track records, there’s no need to be influenced by momentary fluctuations in the stock market. Your simple monitoring and reviewing process only needs to be done quarterly.

Once you take a good look at the process of investing, you find that it’s neither too complicated nor too intimidating to get started today. Planning your financial goals now will greatly benefit your future.