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.
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
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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 FDICinsured 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, longterm 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