Once you determine where
your money is going, and what
you have left over, start by
paying off your most expensive
debt first.
the minimum payment, while continuing to make the minimum
payments on all other cards. Taking these steps to start eliminating
debt will allow you to start investing your money to allow it to
grow for the future.
INVESTING ESSENTIALS
We all work hard for our money, but it is
important for your money to work just as hard
for you. Now that you’ve determined that 20%
of your money should be budgeted to financial
goals, you just need to figure out how to invest. No
matter what you are saving for, you should start by setting realistic,
manageable goals for your money, and then find the discipline to
reach them.
Investopedia breaks investments into three groups: ownership,
lending, and cash equivalents.
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Ownership Investments: Typically the most volatile and
profitable. These types of investments span from stocks, to
owning or running a business, to buying investment real estate,
to purchasing precious objects such as jewelry or art with the
purpose of reselling to make a profit. While you can make the
most money out of these investments, there is often greater
risk. If you have a “risk is worth the reward” mentality, then
ownership investments may be a good option for your money.
Lending Investments: Similar to Monopoly, you get to be the
banker. These low-risk investments, in the form of savings
accounts, tend to return less than high-risk alternatives.
Questioning why your savings account is considered a lending
investment? Your bank uses the money in your savings in
the form of loans, and in return pays you interest. Also, the
Federal Deposit Insurance Corporation (FDIC) insures up
to $250,000 per depositor per FDIC‑insured bank if the bank
goes out of business.
Cash Equivalents: Money market funds are easy to convert
back into cash and the risk and return are both minimal. Your
money is liquid in this type of account, making it easy to get
money out. These types of investments are considered safe
bank deposits, but often yield a higher return. Investing in
“cash equivalents” is best for older investors who are looking
for a safer option, rather than investing in risky, long‑term
stock options.
Paying down debts and putting your money toward your future
is a rewarding experience. You’ve worked hard for your money, so
whether you are saving up for your first car or looking toward a
relaxing retirement, make sure your money is working just as hard
for you. n
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