Imagine that while you are sitting at work being paid by the hour, your money is invested and making more money all by itself. I needed $2500.00 to replace my roof. It takes me over a month to make that much money and of course I have bills to pay. You can imagine how long it takes to actually SAVE that much money after paying the regular monthly bills. Well I didn't have to scrimp and save to pay for it and I didn't have to charge it on my credit card. I had money in a Mutual Fund that generated enough profit to pay for it. I didn't work a single hour to pay for my roof. Now that is a great feeling! I took out enough money to pay for the roof and then some. The original investment is still there making more money for me. My house is 20 years old and I will need a new central air unit soon. My money is making the money to pay for that also! I used to go through all the sale ads in the Suday paper, see things that I thought I needed and run to the store. Since I have been on the Internet I don't buy the paper anymore and suddenly I don't have a desire to run out and buy so many things. Stay away from those sale ads!
How do you resist the urge to buy everything you want and start saving money? When standing in the store looking at something I thought I wanted I would calculate how many hours I would have to spend at work to pay for it. Since I don't exactly love my job, this was a great encouragement to leave my checkbook in my pocket. Since then I have learned to not even carry a checkbook. It's a bit harder to pay for things when you have a limited amount of cash in your pocket. For some reason it is always harder to hand someone your hard earned cash than it is to simpy write a check or pay with a credit card.
It's your choice, you can buy that cute little bonsai tree on the left, forget to water it and watch your money die or decide now to start saving and grow your own money tree! Or you can do like me and do both, but I must confess my little Bonsai tree is dead. They are great to send instead of flowers if you know someone in the hospital.You can order a money tree for under $30.00 but it won't grow any cash.
Mutual Funds
Most of my stock mutual funds are down this year. (2001) Pretty much everything is down this year. One fund is down 12%.. but the overall return for the 9 years I have owned the fund is 15.27%. You can't make that kind of money with your money sitting in a bank, CD or savings bonds. The more you put your money to work, the less work you have to do. Wealth is created by investing, it does not come from working for hourly wages.
The T. Rowe Price Latin America fund made 71.28% last year! Now of course that is not an average return you can expect to make on a fund every year, but the point is it does happen. Look at the stats on this Yahoo Finance page. The average return on this fund over 5 years was 19.67%
Double Your Money
With a 7% return your money will double in 10 years. With a 15% return you can double your money in 5 years. When you start looking at the rate of return on mutual funds you will see that many are well above 15%. In 5 years it is possible to have twice as much money. Money you didn't work for. I love this kind of money!
The rule of 72 is a quick way to figure how long it will take you money to double. Simply divide 72 by the rate of return. So if you assume a rate of 15%, divide 72 by 15 and you get 4.8. You double your money in a little less than 5 years. THAT'S FREE MONEY.
Automatic Investment Plan
It is true what they say.. It takes money to make money. Investing your money is by far better than spending your time working to pay debt. You may think you need a lot of money to get started in investing. You don't! There are many mutual funds that will waive the initial minimum deposit if you sign up for an automatic investment plan. This requires that you allow them to take a minimum $25.00 a month from your bank account. If you are like me and don't have the discipline to mail off a check every month or don't have the minimum amount required to open an account, this is a great way to go.
Investing a set amount, at a set time over a period of time is called Dollar Cost Averaging. If you invest a large amount of money at one time you buy all your shares at one price and it may be the wrong time. Investing over time means you will buy some shares at lower prices than others.
Learn to Invest
How did I get started? I bought a book called the 100 Best No Load Mutual Funds and I bought money magazine which also lists the top preforming funds. Do some research and then visit the funds web site. Look for funds that have a good 5 to 10 year track record. You can download a prospectus and application from the funds web site. Fill out the application and send in your money, you do not need to go through a broker. Click to read the SEC's guide to saving and investing.
A good book for beginning investors.
Assess Your Risk
Do not invest money that you know you are going to need in the short term. The stock might be down and you would be forced to sell at a loss. If you buy good companies and can hold out till the right time to sell, you have the opportunity to make a lot of money. With the dot com boom people were making money like crazy in the stock market. Thing is many of them got so excited, greedy and carried away with it all that they turned around and lost it all. Some saw all the excitement and got into the market when stocks were at their peak. Remember to keep your head, what goes up can come down and come down fast! Do your own research and don't bet your money on the advice of any one person. It's your money, you decide how much risk you are willing to take and you take the blame if you loose it all.
Investing is Fun
Investing money and watching it grow is more fun than paying off debts. Work on your budget and try to start investing at least $100.00 a month. Keep it up for a year and you should begin to realize how much money your money can make! I have to warn you that investing can be addictive. It is somewhat like gambling, but you have a much greater chance of hitting the jackpot than you do if you take a trip to Vegas. Generating money is more profitable than generating debt. Invest money in yourself, the credit card companies can get rich without you!
Stock Market Investing - BOOYAH!
If you think investing is boring or too complicated you need to watch Jim Cramer's MAD MONEY on CNBC. That is channel 45 in Houston, Texas. Mad Money airs at 5pm and 10pm weekdays in Houston.
People may have called Cramer many things, but boring is not one of them. I hate to see what the people that have to clean up after his show call him. I have seen him dumping ketchup all over, chopping up cartons of cigarettes with Black & Deckers new electric chainsaw, slathering Crisco all over a DVD player and many more insane things. These things all have a purpose though, he teaches people about investing in the stock market and he does it in such a way that you won't fall asleep from boredom. Check out the show and also his new book. Watch TV, Get Rich.
Who is this Cramer guy you might wonder. Read the Mad Man of Wall Street article in BusinessWeek for the scoop.
Disclaimer: This site was not written by a financial wizard. I am just an ordinary person who took some risk and invested some money. Sometimes I win and sometimes I loose but the main thing is that I am saving money that would have been spent and gone on something else anyway. Trading and investing involves risk and past performance is no guarantee of future results. The only purpose of this site is to get you interested in saving money instead of running up huge debts. Do some research and start a savings or investment plan. Even $25.00 a month will make a difference over time.
