Rule #0
The not-so-secret
rule to financial success is to spend less than you make. Duh. Set goals, budget/plan
ahead, keep fixed costs low, carefully consider frivolous spending, and invest
the rest. If this is not under control, stop here and come back later.
Rule #1
The single
most important thing you can do to achieve financial security is to begin saving
regularly and to start as early as possible. Every year you put off investing
makes your ultimate retirement goals more difficult to achieve.
Rule #2
When starting
out, only invest money that you can afford to lose. Don’t play with money you
need for your mortgage/rent, health insurance, groceries, utilities, and other
debt. Investing is legalized gambling and you could lose it all.
Rule #3
Investing is
for everyone. Given that interest from
saving accounts are ridiculously low, one’s only option is to learn how to
invest to keep ahead of inflation.
Rule #4
Build a portfolio of “buckets”. Fill the buckets in the
following sequence.
The first bucket is for low risk stuff, like checking, savings,
and money market accounts, which will have low returns but are good for
short-term needs. Other investments, like treasury bonds and
certificates-of-deposits (CDs) are also low risk and pay better and are good if
you don’t need the money for a year or more into the future. This is your safe low-risk
bucket of money.
The second bucket is for tax-advantaged retirement
accounts.
When the low risk bucket is in good shape, and your
retirement accounts are getting maxed out every year, only then should you
start working with the third bucket of higher risk stuff consisting of ETFs,
Stocks, Bonds, REITs, etc. This is the money that you could lose … or gain … a
lot.
The following chapters are mostly about this riskier
portfolio of investments.
.
Clear and Concise. Forwarded the link to my favorite 20 and 30 somethings.
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