Once you determine
where your money is
going, and what you
have left over, start by
paying off your most
expensive debt first.
minimum payment, while continuing to make
the minimum payments on all other cards.
Taking these steps to start eliminating debt
will enable 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 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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