How to Start Investing Now!

Many people never start investing because they just don’t know how.  It’s the not knowing that scares people in to submission.  But it doesn’t have to be scary, and overcoming this fear can change your life.

There is tons of information out there about investing, and it can seem daunting at first.  But once you know the basics, you can jump right in head first!  You can begin investing for your future right now, just start slow and take baby steps.

…But first, pump the brakes!

You need to be investing for your future.  That is a fact. But you need to make sure your ducks are lined up before you get started.   So let’s first take a quick look at where you stand today.

Do you have mountains of credit card debt?  Are the interest rates over 10%?  If they are we need to take a step back and get you out of that situation.  Remember the idea here is get your money growing for you.  So, if you are going to invest $100 per month and hope for the historical average of 10% return, but you have $30,000 in credit card debt at 27% interest, you are going to get nowhere fast.

So here are a few things you need to have done before you get started:

• You are maxing out your 401k, if your employer offers one (come on guys, it’s free money!)

• You have your credit card debt down to a manageable level

• You have some money set aside in case of an emergency (preferably 3-6 months)

If you meet these criteria, then you can keep skipping down the yellow brick road!  Otherwise, get focused and knock these things out, you’ll be happy that you did!

…Check under the couch!

Ok, so now we know we are in good shape, we need to scrape some money together to invest.  You don’t have to have much! When I got started, I had $500 bucks.  That’s all it takes.  You could theoretically start with less but it may be a better idea to save up to that amount or more in a higher interest savings account.

Time to do some planning…

Before you start buying shares of Google, you need to do some planning.  What is this for?  Are you investing to pay for college?  Is it for retirement?  How much time do you have before you need it?

You need to be very specific as far as what you are trying to accomplish here.  You don’t want to be buying stocks all willy nilly. Having a good indication of what you are trying to accomplish will help you determine how you need to get there.   So take the time, it’s very important to your success.

Well where do I put it?

There is one main thing you have to remember here.  Diversification is king. Spread it around a little bit.  Don’t put all your Dow Jones eggs in one basket so to speak.

You want to make sure if you lose some money in one area you have the potential to balance out with an increase in another area.   So if you are jumping in to stocks and mutual funds, make sure you buy some bonds too, and vice versa.  A lot of this will be determined by what your plan is for the money.

The longer time frame you have before you need the money, the riskier you can play because you have the time to make up any potential losses.  Make sure you are investing in accordance with your risk profile.

My recommendation…

Buy index funds.  That seems pretty simple.  Index funds are a mutual fund of sorts that follows the stock indexes.  So if you want the same return as the Dow Jones, you buy the Dow Jones index fund and it will be representative of the entire basket of companies that are traded there.

This takes the guess work out of investing. This goes back to what I said about diversification.  When you get in to a fund, you are buying a basket of stocks.  You have built in diversification right there.

This is a good way to get started in investing.  It gives you some returns, with a little bit less risk, and while you have the free time you can be doing more research on investing.

Research, Research, Research…

This article is a very high level look at investing.  If you really want to get in to investing wisely, you need to do your research.  There is a ton of information out there that can help you make good choices and better plans.  You have to be careful out there because it really isn’t a game.  You can lose all of your money. I’ve seen it happen.  So start with the basics and study hard on the rest and you can be very successful in  investing.

You can send your kids to college…and get that house on the beach you always wanted to retire in.  Just remember, study now…and build sand castles later…

Do you have any advice you can add to this?  Have any questions I can help you with?  Jump right in to the conversation in the comments section!

For today’s Link Day list – I thought I would put together a list of my favorite personal finance blogs.  As an accountant and former financial adviser I am very picky with the finance blogs I read.  Many are just useless babbling that doesn’t really help anyone.  But these select few are great and full of very valuable information.  I highly recommend them!

Take a look!

1.)  Get Rich Slowly – This blog is a must have if you are looking for great personal finance advice.  There is plenty of real world examples that you can apply to your own situation.  This is one of the best!

2.)  My Money Blog – Another site with tons of information.  The archives goes back several years so you could spend weeks going through posts.

3.)  The Binary Dollar - A site that is essentially personal finance for dummies.  It is very simple and gets you the basics, which is what everyone should start with anyway.

4.) Five Cent Nickel – Finally a site that isn’t dreadfully boring to read.  This blog gets you the information in a straight forward way but is definitely not dull.  Ever read in monotone?  If that doesn’t make any sense, trust me, its annoying!

5.)  2Million – This is a site about a journey to just that…with tons of useful information and practical advice given along the way.

That’s it for todays links.  I hope you check them out and enjoy them.  Don’t forget to check out my archives and read my personal finance articles too! Any suggestions for other sites?  Toss them in the comments section!

21 Ways to Have Fun for Free!

In response to my post from yesterday, I got a comment from Steve that said, “Dude, you forgot #8, cut out all the fun!” While I don’t agree with Steve that those 7 ideas are cutting out all of the fun from your life in order to save money, I think this is a great opportunity to list 21 ways you can have tons o’ fun without spending a dime!

Saving money doesn’t have to be a chore.  You shouldn’t have to hate your life because you are trying to be frugal.  Just get a little creative.

Use your imagination!

When you were a kid, you didn’t have any money to spend but you had fun all day long!  What did you do then?  Why not now?  Don’t underestimate the amount of fun you can have by just acting like a kid again.

So here they are:

1. Build a bonfire

2. Go camping

3. Grab some friends and play freeze tag (you know you want to!)

4. Have a picnic

5. Go kayaking

6. Read a good book

7. Build a fort

8.  Play beer pong

9. All night board games

10.  Go do karaoke

11. Start a blog

12. Blast your favorite cd

13. Take a ton of funny pictures

14. Go swimming

15. Create your own holiday and celebrate it

16. Go see Shakespeare in the park

17. Make someone a mixed cd

18. Watch funny movies

19. Play with your kids

20.  Go to the dog park

21. Explore downtown

Extra tip: Watch the Big Lebowski as many times in a row as possible!

See, saving money and having fun don’t have to compete, you can do them both at the same time!  Do you have any ideas to add to the list?  Let us know in the comments section!

7 Ways to Save a Little Money Now

I have been doing a little cost cutting on our wedding budget in the last couple of days. And I started thinking about ways to save a little money in our every day budget as well. So why not share the love and write a post on 7 ways to save a little extra money now.

The biggest problem we have had with our budget in the last two years has been food. We have these massive weekly grocery bills that you would think would be the majority of our food spending.

Unfortunately for us this is not the case.

We spend most of our discretionary income on eating out. We buy all this food to make at home, healthy wonderful food, and we let it sit in the fridge while we go out to dinner. I never realize how often this happens until the end of the month comes and I review the budget and bank statements.

It’s never pretty!

And every month we vow to stop eating out so much. But does it happen?

Of course not.

Over the years I have come across some great ideas to counter this and many other money wasting issues and here are a few:

1. Fund an eating out envelope –

This one is going to save us! Look at your budgeted amount for eating out. For us right now it is $100.00 a month. Go to the bank and pull out the $100.00 or whatever your budget is and put it in the envelope. Eat out as much as you like with the money in the envelope, but make a promise to yourselves that once it’s gone, it’s gone!

2. Back away from the Starbucks! -

This extremely difficult for me as well. I LOVE coffee! But if I went to Starbucks every morning I would be broke. I get my venti cinnamon dolce and a blueberry scone and it comes to around $7.00. If I did that every day for a year like I would like to I would be bleeding $2,555 per year. It’s good, but not that good! Make coffee at home or better yet, start to break the addiction to coffee.

3. Cut out the video rentals –

When we want to watch a movie, which is often, we usually just pay-per-view it on our cable box. This is the fastest, simplest way to get a movie going and chill out. But because that money gets charged to your cable bill, it doesn’t seem to hurt as much. $3.99 once a week for a year costs you $207 dollars a year. Watch a movie you already own or actually watch something on that HBO channel that you pay for and never watch. These things add up!

4. Quit the tobacco –

I will admit it, I am hooked on nicotine myself. I used to smoke and I chew tobacco now, and there is nothing harder that I have experienced then quitting. It is a disgusting habit and I am working hard to quit. But what is making it easier to make that decision is the cost of tobacco. I actually have it easy because smokers pay even more than me but I am paying $4.00 for a can every other day. Forgive me for being blunt but that is just stupid! When I quit for good, which will happen soon, I will save $832.00 a year! I can think of a lot of better things I would love to do with that money.

5. Buy generic –

Everything from prescription medication to toilet bowl cleaner has a generic version. Cold medicine to toilet paper, they all have a version that is exactly the same but steeply cheaper than the name brand. A lot of times they are made by the same company in the same manufacturing facility. But only one of those two products coming off the line has to pay for advertising costs. Any time you go shopping, check the generic version, if it is the same ingredients it’s the same product. Buy generic and save a boat load of money!

6. Check out your cell phone bill –

If you haven’t closely examined your cell phone bill, now is the time. I recently went through every charge on my cell phone bill and found several things that I didn’t need and several things I shouldn’t be paying for. It is very easy to get signed up for things that are already included in your package. For instance, I found that with my plan I had unlimited text messaging but that I somehow signed up for the $5.00 per month 500 text messages program. So for a year or two I had been paying for text messages that I already get for free. Awesome! So take a hard look at your statement and see what you can cut out. You might even be able to cut your minutes back and save even more.

7. Become a vegetarian –

You don’t have to be a vegetarian exclusively, although that will add years to your life, but a part time vegetarian. Cutting back on meat will save you bunches of money at the grocery store. Meat is typically one of the most expensive items in your shopping cart and you don’t need it. My mom serves meat with every meal, she never misses and her grocery bill is ridiculous, even though the food is breathtakingly good. This is a simple way to save a bunch of money right away.

These are just a few of many ideas you can use to save money now. We could all use a few extra dollars in our pocket right now. Get creative. Find any possible way you can to save a few bucks. I know sometimes it feels like saving a couple of dollars doesn’t really make that big of a difference, but it does. Those dollars add up fast.

Let me know some of your ideas, I need the help too. I’d love to hear from you!

9 Great Tips on Budgeting

Just because money doesn’t buy happiness does not mean you should ignore it altogether.   Poor financial habits can stress you out or strain your relationship, but it doesn’t have to be that way.  Follow these 9 tips on budgeting to get a handle on your financial future.

 I feel that when it comes to your finances, budgeting is the obvious place to start.  This is where your money goes, which I think is much more important then how much you bring in.  If you don’t know where it’s all going how can you identify problem areas and address them?

 I started budgeting many years ago and it really has changed my life in some ways.  It has pointed out areas in my life that needed a change for sure.  At one point I found out that I was spending $200 per month on coffee. 

 That’s crazy!

 I can’t afford to spend $200 per month on coffee.  But not only that, I should not be drinking that much coffee in a month anyway.  So I was able to find a way to slowly ween myself off of coffee and improve my financial situation at the same time. 

When you start budgeting, you will start to clearly see areas you need to fix.  You will be able to identify areas that are sticking out like a sore thumb and areas that will be agonizing to cut back on.  But you have to remember the bigger picture in all of this.  You won’t be agonizing over that coffee you are missing out on when you are on the beach in Barbados next summer.  

Saving all that money allowed you to go on an AMAZING vacation!  See it’s all worth it.  I truly hope it works out that well for you though.  So take these 9 tips to heart, use one or use all of them, and enjoy the ride to financial freedom.

 Tips on Budgeting:

 1.)    Start slowly – You don’t need to follow your spouse around with a little notebook and pencil and write down every penny they spend.  Start with just being aware of where your money goes.  Make  a list of the major spending categories and keep track of those.  Just having this awareness will help tremendously.

2.)    Use cash where possible – I will be writing more in the future on the envelope system, but for now, try to use cash whenever possible.  It’s easy to spend when you are just zipping that plastic magic wand through the machine.  Try taking out the cash you will need for the week and only spending that amount.  It’s much harder to let that cold hard cash leave your hands.

3.)    Use a spreadsheet – There are a ton of free budget templates out there for you to download.  Find one and fill it out.  You may not stick to it exactly at first but eventually you will be determined to come in under your allotted amounts each month.

4.)    Needs vs. Wants – Before any purchase ask yourself if this item is a need or a want.  When you go to the gas station, you will say that filling the tank is a need.  I can agree with that.  But the chili dog from inside, I can say with confidence you definitely don’t need that…your body and your pocket book will thank you.

5.)    Break budget into smaller units – Most people budget for the month.  There is nothing wrong with that.  But for me it always seems to be easier to comprehend if I break it down in to weekly and daily buckets.  If say I can only spend $400 this month on eating out, that means I have $100 per week and around $14.00 per day.  Knowing that keeps me aware of what I can spend each day and if I’m going to go over that number I can stop myself.

6.)    Go green! – Start moving towards a much simpler life style.  Instead of buying 3 bottles of water each day, consider buying a water bottle and filling it up each day at the water fountain.   Or consider saving on gas by walking places or riding a bike.  It may not seem like it but these types of thing add up very quickly, and you will be saving the planet!  These savings allow you to spend a little more in categories that are a little more important to you.

7.)    Check your progress – Make sure you look at your spending on a month vs. month basis so you can see if you are improving.  If you’re spending is accelerating in critical areas you may need to evaluate some root causes.  I like to look at trends. 6 months ago I was spending this much, and I’ve gotten down to this much.  Go me!

8.)    Set Goals – After you have created your budget spreadsheet and you are monitoring your spending, set some goals.  Pick an area or category and set a goal to reduce spending in this category by 25%.  Then list small steps to achieving that goal.  Post them where you can see them, (your checkbook, or your car etc.) and then when you achieve one of your goals go to number 9.

9.)    Reward yourself! – No good deed should go unrewarded.  When you set a goal or reach a milestone in your financial journey, treat yourself.  Spend a little extra for some ice cream or a movie.  Or if you hit some of these tips really hard, make that trip to Barbados I mentioned earlier your reward!

 These are only a few ways you can improve your financial situation with some planning and awareness.  I plan on writing about many more in the future.  I would love to hear some tips that you have learned over there years.  Please leave me a note in the comment section below!