How to Save More Money?

Source:http://kclau.com/money-saving-tips/save-more-money/
Beside the most frequently asked question about how to make more money, this is the second financial challenge most people demands for solution. Most of the dreams you have would have most part of it linked to how much money you saved. Be it a dream to travel the world, or a dream to send your children to study oversea, a substantial amount of money saved beforehand will ensure to fulfill those dreams.

Let’s go through what I think is the three most important things that ensure you to accumulate money seriously.

Motivate your elephant early

Most people give up their long term goal for short term pleasure. You find it hard to keep those two hundred ringgits untouched at the moment you are looking at some high quality fashion at a deep discount. Almost immediately you forgot that you should have save this two hundred allocated for your annual trip savings, which is only needed ten months later.

That’s the part controlled by the elephant in your mind, which is the irrational part of your brain. Your rational part of brain is thinking that you should save RM200 for twelve months then you can treat yourself a nice trip, or whatever is your dream. But the elephant is so huge that is too hard to be controlled by your rational thinking.

That’s why you need to motivate your elephant. Make it go to the direction you want, not following where it wants. And you better motivate it early enough because accumulating money takes time. The longer time you have, the better is your chances to achieve the saving goals.

Pay yourself first

You need to make yourself the first priority. When money comes to you, you have a very important decision to make. You can give the money to other people (paying bills, shopping etc). You can also save it for yourself.

Many people make the mistake of paying other people first. They always put themselves at the bottom of the payees list. That’s miserable because at the end, you will only get peanuts. But how do you ensure that you save first before you spend? That’s why the next component of having an effective saving system is so crucial.

Have an effective saving system

Since you know that it is really hard to ride elephant when it senses danger, you don’t want to let it face those risky moment. Since It is your emotional part of the brain that is holding you back from your long term saving goals, you need to have a system that prevent your emotion to take part in financial decisions.

That’s why an effective saving system always works for most people. Consider the EPF. It is a forced saving scheme. You may feel a pinch when you see your salary statement every month. So much is cut away for your future retirement savings. But there is nothing you can do about it because you are forced to take part in the program.

Why not put such saving system to do more good for you? There are rational parents who take up education saving plan from insurance company almost immediately for their every newborn child. Since it is a commitment to the education funding of their children, they never fail to save and complete the tenure of the plan.

Trust me. These saving systems successfully put the elephants to sleep. Your financial decisions will no longer be distracted by it. Be creative enough, and you will be able to design your own system that works.

Conclusion

As a conclusion – to save more money, you need to start an effective saving system that pays yourself first as soon as possible.

Just start now!

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How to Strategize Against Debt

Source:Yahoo Finance
From putting spare change to work to going on a spending fast, these folks found creative ways to chop their debt.

Anna Newell Jones

Strategy: Go on a spending fast for a year
Advice: Get creative. There are endless ways to save.

I had been spending over my means for a while. Every month I was spending at least $300, overdrafting my account and feeling horrible about it.

I realized I had all these wants and it was an insatiable thing. I would say, "Oh, I love this top from Anthropologie," and then as soon as I got it everything would be great... until I wanted something else. So I knew I needed to do something drastic. And one day, it clicked.

I decided to start a spending fast for the new year, which meant no spending on anything except absolute necessities -- like my mortgage, utilities, car payments -- oh, and hair dyeing. That was one "want" that I turned into a necessity as I started to see my roots grow in.

I can't buy clothes, no coffee out, no eating out. To save money, I've done the normal budgeting things like buying generic brands of groceries. But I've also started wearing all black and dyeing my clothes to extend the color. I've been re-gifting, growing my hair long to avoid haircuts, stuffing two loads of laundry into one and eating a lot of old canned food I've found in my cupboard. I also make random stuff to sell in my spare time. I have a store at Etsy.com where I sell zombie portraits of people, super cute baby onesies and banners, tags and shipping labels.

My year-long spending fast began on January 1, and so far, I have saved $5,772.25. $4,800 of that went to credit cards and the rest will go to paying my parents back the $3,247.97 I owe them and my $10,000 in student loans.

Lance Pickett

Strategy: Live without the little things
Advice: Don't go too far -- like trying cloth diapers to save $60

My wife and I owed $18,000 in student loans, $6,000 in car loans, $2,000 in credit cards and $152,000 in my mortgage.

We were living paycheck to paycheck and I was tired of seeing my bank account zero out every month. So we wanted to get out of as much debt as possible as soon as possible. We started by saving an extra 1/12th of our total required expenses -- like mortgage, utilities and Internet -- each month, in order to have one month worth of bills saved up at the end of the year. Then we got excited and doubled that. In three years we had six months of living expenses and threw that into a high interest CD at 5%. That really got us going, seeing the money grow -- and we became obsessed with eliminating debt.

We just really took a look at what we need and only spending money on those things. I used to eat out a lot and that cost me $200 a month. Now we invite friends to "eat-in" at our house. We have a garden and purchase produce from co-op programs. Before we became debt-obsessed we would also get nice Christmas gifts for each other, but now we limit each other to $50.

Now, if there's something we want we put it on our "Dream Board," a cork board by our bedroom door that we see everyday. And it will stay there until we're debt free. It also has the loan schedule for our house, and each month we scratch off a month. Next to the schedule, we post our ultimate "want" that we agree to purchase -- with cash of course -- once our house is paid off. I have a 2010 Camaro waiting for me.

Cutting back so much has been hard, but we've learned a lot along the way. My wife learned some things are worth paying more for after trying to use cloth diapers -- which most people use as burp rags -- pinned inside training pants with plastic pants over them for our two kids, all so that she could reuse the diapers and not spend $60 a month on Pull-ups. As a result they both got horrible rashes, so we switched to a cheaper brand of regular diapers.

Altogether, we've paid off around $90,000 since 2005.

Jowharah McNeil

Strategy: Put spare change to work.
Advice: Cut back, use cash.

I was laid off for 18 months and had two credit cards to pay off, so I had to learn to be creative. My husband and I have been trying out a cash-only spending system and we're only allowed to spend $40 a week per person on non-necessities. That means once the cash is gone, it's gone -- no more spending.

While doing this strict new budget, we noticed we had a lot of loose change everywhere -- in our cars, leftover from doing laundry -- so we started collecting all the change we could find and putting it in a jar by the door. Every month, we would use whatever money is in the jar to make payments on one of the credit cards. The minimum payment is only $39, but we usually paid an extra $50 or $60 using the coins we collected so that we can get it totally paid off as soon as possible.

Since we started collecting the coins about six months ago, we've already paid more than $560 of the $1,000 balance on the card, so this is really working for us.


Brian Leigh

Strategy: Track your expenses
Advice: Don't limit yourself too much, or you will give up.

I was able to pay off $22,000 of my $35,000 in credit card debt over the past 24 months just by looking really closely at where I was spending my money.

Being young, I made foolish mistakes with my credit cards, so when I started really wanting to knock out my debt, the biggest thing for me was tracking my expenses. I started by adding up how much I had been spending on meals and found out I was spending almost $55 a week just on lunch at work.

After that, I sat down, got a little notebook and started tracking every single thing I spent money on. I did that for a couple months, and then I came up with a payment plan. After overestimating how little I could live on the first month, I decided to take small steps.

I readjusted my allowance until it worked with my lifestyle. I started to bring my lunch to work four days a week, I shopped for groceries for one week and would then eat only leftovers during the weekend. I learned how to cook and found foods -- like broccoli -- that I can use in multiple meals so I don't have to waste anything.

To make sure my money goes where I need it to go, I set up two checking accounts and two savings accounts. I deposit $250 into the first checking account every two weeks --when I get my paycheck -- to use for everyday expenses. When it runs out, I don't go out.

I put another $250 into the first savings account as an emergency fund. Every five paychecks, I remove $1,000 from this account and apply it toward my credit card debt. I deposit $100 into the second savings account every paycheck. This account is used for long term goals, like a down payment on a house or a big vacation I want to take. Everything else gets deposited into my second checking account, and my bills and rent are automatically paid out of this account. Those automatic payments include an extra $1,000 toward my non-credit card debt -- like my student loans and car loans -- every month.


Jaime Tardy

Strategy: Budget!
Advice: Save, save, save before you quit your day job.

A couple years ago, I decided I wanted to have a baby and quit my job. But there was a problem. My husband and I were in debt, and I made two-thirds of our household income. So I couldn't just quit.

I started out by sitting down and adding up all our debt -- which ended up being around $70,000. The first thing I thought was, 'Wow, we really need to start getting rid of this. We should sell our car right away.'

After some prodding, my husband got on board too. We sold his car and were able to immediately get rid of $19,000 of our total debt. After that, we knew we were totally doing this.

Craigslist and eBay became our best friends, and we sold everything from a kayak to a weight bench and a computer monitor.

My husband did some website design jobs on the side to make some extra money, and we printed out a budget each month so we knew exactly how much we could spend and what we would be spending it on.

We saved on gas costs by limiting the amount of driving we did, and we put ourselves on a grocery budget of $300 a month. On top of that, we cut out cable, lowered our phone bill as much as humanly possible and switched our car insurance twice in one year to find lower rates.

By the time I quit my job for good -- which was less than two years after I started the budget -- we had paid off $70,000 in debt and put $23,000 in the bank as an emergency fund

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Matawang Bersandarkan Emas Tidak Menjadikan Ia Islamik

Source:http://www.pakdi.net/matawang-bersandarkan-emas-tidak-menjadikan-ia-islamik/
Merujuk kepada Dinar dan Dirham Kelantan, Tun Mahathir dalam ucap utama Global Islamic Finance Forum 2010 menyatakan matawang yang bersandarkan emas hanya menjadi Islamik sekiranya ia bebas dari riba.

Saya setuju dengan kenyataan beliau kerana mata wang yang dibenarkan oleh Islam tidak terhad kepada emas semata-mata. Selain emas dan perak komoditi seperti gandum, barli, kurma dan garam juga boleh dijadikan sandaran matawang.

Apa yang penting, sebarang matawang mesti bebas dari riba. Pada zaman Rasulullah saw, kita maklum emas dan perak adalah matawang yang dipanggil dinar dan dirham, tetapi riba tetap wujud secara berleluasa sehinggalah khutbah terakhir baginda, isu riba tetap menjadi penekanan kerana riba masih belum dihapuskan sepenuhnya.

Malah, sekiranya tuan puan terlibat dengan “pelaburan emas” , hanya penjualan tunai sahaja yang halal. Sekiranya, bayar selesai emas belum terima, itu riba. Begitu juga sekiranya emas selamat diterima, tetapi bayar ansur-ansur, itu juga riba.

—
Gold Backing Of Currency Doesn’t Make It Islamic – Dr Mahathir

KUALA LUMPUR, Oct 26 (Bernama) — Backing currency with gold does not make it Islamic, former prime minister Tun Dr Mahathir Mohamad said on Tuesday.

He said it became Islamic only if transaction in the currency did not involve interest or riba.

“It is not the name that is important. It is the gold backing for the currency, whatever may be its name,” he said in a keynote address at the Global Islamic Finance Forum 2010 here.

He said there were repeated suggestions for the use of gold dinars, and Muslims bankers must not be moved by sentiments alone.

He said people needed also to be conscious that gold prices could change and its value in different countries would differ.

“If we use gold as a currency domestically, the purchasing power will differ with different countries. Besides that, its bulk makes it unsuitable as currency for everyday use,” he said.

Dr Mahathir said when gold was the standard by which currency was issued, it was fixed at US$36 per ounce of gold.

“Today, one ounce of gold worth US$1,400. One US dollar would be equivalent to 1/1400 ounce of gold.

“It would be very tiny if issued in coins. It is not practical to carry gold coins in the pocket,” he said.

He said the place for gold would be in the settlement of international trade as it involved large sums of money and payment in physical gold would be inconvenient because of its bulk.

Meanwhile, Dr Mahathir said there was a great future for Islamic finance but its success would not be because it did not involve payments of interest.

He said its future depended on ethical practices, supervision by governments, avoidance of dubious practices and products, concentration of financing of real business and rejection of betting on futures and manipulation of the market.

“Profiteering must be avoided, and there must be a limit to money creation,” he said.

Dr Mahathir said the sector had found many ways to be profitable without resorting to blatant interest charges but the conventional banks were forever coming up with banking products.

“While it is important that Islamic banks match these products, it should be very careful that the products are ethical, that they truly conform to the tenets of Islam,” he said.

He said proper regulations and supervision by inspectors who themselves must be under supervision was important if the sector was to grow and become a good alternative to the current banking system.

“The Islamic banking system has not yet been abused now but this does not mean it will never be abused. There are as many greedy people among Muslims as there are among the followers of other religions,” he said.

He said the executives should be well-compensated and they must never award themselves unreasonable pay, compensation and bonus.

“These are tough conditions but if they are not met then Islamic finance may meet an early grave,” Dr Mahathir said.

– BERNAMA

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First Person: Why I Never Borrow Money

Source:http://finance.yahoo.com/banking-budgeting/article/111088/first-person-why-i-never-borrow-money?mod=bb-debtmanagement
Like many 20-somethings, I made a lot of financial mistakes before I finally grew up. Nearly every dollar I spent through eight years of college and law school was borrowed before I actually earned the money to pay for it. Between student loans and credit cards, I graduated with significant debt. And the crushing weight of that debt is why I never borrow money now.

Debt Leads to Depression

This is not a scientific fact that I've verified, but rather a conclusion I drew after crawling out of debt for more than 10 years. Every time a bill arrived in the mail or someone called to ask why a payment was late, I grew more withdrawn and disheartened. I felt like a tire with a slow leak, and I often wondered if it would ever end. To borrow money is to impose upon yourself an unnecessary burden -- both financially and emotionally.

Debt Becomes a Habit

Safe within the comfortable bubble of college, the real world never intruded to remind me that borrowing money would one day lead to consequences. It was painfully easy to pull out my credit card to make a purchase or to apply for yet another student loan. The money I earned went directly to pay for the debt I had incurred, though it was never sufficient to cover all of it. It became a habit for me to use my income to pay off debt rather than to fund the necessities of life.

Debt Provides False Security

Because I knew that I had a credit card to pay for the things I wanted, there was no reason for me to stay in my dorm or apartment rather than go out with friends or to put off a purchase until I had saved the money to buy it. During those years in school, I never felt financially strapped. Then, upon graduation, the money I'd borrowed became an albatross I thought I'd never shake.

Debt Creates Stress

This seems like a given, especially if you've ever accumulated a massive amount of debt, but when you borrow money, stress is a constant companion. For years, I lived in fear of losing my home and everything else. I worried about whether I'd be able to cover utilities after paying on my debts, and I was always looking for ways to make a few extra dollars. It's no way to live.

Saving Is Rewarding

Now, when I want to buy something expensive, I save my money. My wife and I have a separate savings account that is devoted to vacations, electronics, conferences, and anything else we want to do. We don't borrow money to obtain the things we desire; we save for them until we can afford them. And it's far more satisfying than if we just plunked down our credit cards.

Saving Makes You Think

When I was borrowing money hand over fist, my purchases were never carefully considered. I took the caveman approach to spending money: Want, Find, Buy. Now that I never borrow money, every purchase gets run through my mind many times during a period of weeks or months. Often I decide it isn't worth the effort, and my money goes toward more worthy purchases.

There Are Exceptions

What if my child needed an expensive medical procedure for which I didn't have the cash? I'd borrow money. What if my car broke down and I didn't have the money to fix it? I'd probably borrow money.

There are exceptions to every rule. But my goal is to continue saving money until I've stowed enough cash in the bank to wipe out all those exceptions. In my opinion, there is no greater security on earth than the knowledge that I don't have to borrow money, ever, to take care of my family.

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Budget 2011 Highlight

Source:http://ck5354.blogspot.com/2010/10/budget-2011-highlight.html
Below are the salient points as tweeted by the PM's office:
* 1Malaysia Development Fund Bhd (1MDB) will provide RM20 million to the 1Malaysia Youth Fund. This fund will be utilised to instill the 1Malaysia spirit.
* To assist children, particularly from low-income families, excel academically, the 1MDB will provide multi-vitamins for primary school pupils.
* RM1.9 billion allocated to environmental preservation, including implementing the River of Life Programme and KL greening.
* RM70 million allocated for programs with select NGOs to help the government strengthen the family institution and address social ills e.g. baby dumping.
* RM350 million allocated to implement various programmes to combat crime, including burglary, motorcycle and car thefts.
* The government will provide an additional 25 1Malaysia clinics. Since 2009, 51 1Malaysia clinics are in operation.
* RM15.2 billion allocated to build new hospitals, increase the number of doctors and nurses as well as to obtain supplies of medicines and equipment.
* Toll rates in four highways owned by Plus Expressway Bhd will not be raised for the next five years, effective immediately.
* RM100 million allocated to implement various programmes, including resolving Orang Asli land rights and border settlement issues.
* The monthly allowance for KAFA teachers will be increased to RM800, an increase from RM500, starting January 2011.
* Effective January 2011, the monthly allowance of imam will be increased from RM450 to RM750.
*Allowances for JKKK, JKKP, JKKK Orang Asli chairmen and Tok Batin increased to RM800.
* Government to establish a 1Malaysia Smart Consumer portal to help the rakyat keep abreast with price movements of retail goods.
* RM974 million allocated as price subsidy for paddy, fertilisers and paddy seeds. RM230 million for production incentives and increasing paddy yield.
* Build and upgrade rural roads in Sabah and Sarawak with an allocation of RM2.1 billion and RM696 million in Peninsular Malaysia.
* RM2.1 billion allocated to build and upgrade rural roads in Sabah and Sarawak.
* RM6.9 billion allocated to implement basic infrastructure such as water and electricity supply as well as rural roads.
* First-time house buyers will be given stamp duty exemption of 50% on instruments of transfer on a house price not exceeding RM350,000.
* Government will extend tax relief of up to RM5,000 to help parents with expenses such as daycare, caretakers and other daily needs.
* Government will launch assistance programme to benefit 80,000 disabled individuals with an allocation of RM218 million
* In 2011, the government will allocate RM1.2 billion to the Ministry of Women, Family and Community Development.
* To develop football, the government will establish a Football Academy in Pahang with RM20 million to produce quality football players.
* For sports development and management, a sum of RM365 million is allocated to the Ministry of Youth and Sports.
* Government will allow flexibility to self-determine fully-paid maternity leave, not exceeding 90 days from the current 60 days.
* Government will provide 40 1Malaysia Taska (nurseries) to assist women to obtain quality childcare and early education for their children.
* RM30 million allocated to introduce the Single Mother Skill Incubator Programme and the Prime Entrepreneur and Women Activist Award.
* Government will enforce basic minimum wages for security guards, to between RM500 and RM700 a month depending on location.
* RM200 million from the Human Resource Development Fund to be used by companies to fund specific training programmes for their employees.
* RM200 million allocated to conduct part-time training in the evenings and weekends in selected training centres nationwide.
* 1Malaysia Training Programme will commence in January 2011 with an allocation of RM500 million.
* RM474 million provided to enhance productivity and skills of non-graduates.
* Government will also allocate RM50 million to Multimedia Development Corporation to train graduates in ICT.
* RM60 million allocated to further intensify the Industrial Skill Enhancement Programme in State Skills Development Training Centres.
* RM20 million allocated to increase PhD qualified academic staff to 75% in research universities and to 60% in other higher learning institutions.
* RM213 million allocated to enhance proficiency in Bahasa Malaysia, strengthen the English language.

* RM576 million allocated in the form of scholarships for those wishing to further their studies.

* RM250 million allocated for development expenditure to schools: religious, Chinese-type, Tamil national, missionary and government-assisted.

* The government will also strengthen the curriculum and appoint 800 pre-school graduate teachers.

* Government will increase pre-school enrolment rate to a targeted 72% by end-2011 through an additional 1,700.

* RM213 million is allocated to reward high-performance schools.

* RM6.4 billion is allocated for development expenditure to build and upgrade schools, hostels, facilities and equipment.

* Government will establish a Talent Corporation under the Prime Minister’s Office in early 2011.

* RM29.3 billion allocated for Ministry of Education, RM10.2 billionn for Ministry of Higher Education and RM627 million for Ministry of Human Resources.

* The government proposes that the rate of service tax be increased from 5% to 6%.
* RM200 million is allocated to purchase creative products such as high quality locally-produced films, dramas and documentaries.

* For Sarawak Corridor of Renewable Energy, RM93 million is allocated for facilities.

* RM178 million is allocated for the East Coast Economic Region projects.

* RM133 million is allocated for the Northern Corridor Economic Region.

* For Iskandar Malaysia, a sum of RM339 million is allocated.

* Corridor and regional development will be accelerated. The government has allocated RM850 million for infrastructure support.

* The Government proposes that sales tax be exempted on all types of mobile phones.

* Import duty and sales tax exemption on broadband equipment are also extended for two years until 2012.

* Multimedia Development Corridor programme allocated RM119 million. Focus is on creating an innovative digital economy.

* RM127 million to be allocated to support domestic oleo derivatives companies and RM23.3 million to expand downstream palm oil industries.

* Measures include encouraging replanting activity to replace aged trees with high quality new clones through RM297 million.

* In efforts to propel the palm oil and related products industry, several measures will be implemented.

* The government proposes that import duty on approximately 300 goods preferred by tourists and locals, at 5% to 30% be abolished.

* To support the tourism industry, the government will allocate RM100 million.

* RM3 billion eco-nature resort Nexus Karambunai, Sabah, to commence 2011.

* Infrastructure facilities to be allocated RM85 million to facilitate construction of hotels and resorts in remote areas.

* The government allocates RM3.8bn in 2011 to increase productivity and generate higher returns in the agriculture sector.

* The government will implement the Programme on Blending of Biofuels with Petroleum Diesel (B5 Programme) in June 2011.

* Malaysia is committed to reducing carbon emission intensity to preserve the environment.

* Tax exemption on income from trading of Certified Emission Reductions certificate to extend until year of assessment 2012.

* Hundred percent import duty and excise exemption for hybrid vehicles. To further encourage ownership of hybrid cars, import duty and excise duty exemption will be extended until Dec 31, 2011.

* The government is committed to develop green technology to ensure sustainable development.

* The government will allocate RM146 million to support the oil, gas and energy industry.

* A sum of RM857 million is allocated for local E&E companies to compete at the international level.

* Existing income tax relief of up to RM6,000 for employees contributions to EPF will extend to Private Pension Fund contributions.

* To revitalise capital market activities, the government will launch a Private Pension Fund in 2011.

* The Malaysian Technology Development Corporation will be provided a start-up fund amounting to RM100 million to provide soft loans.

*The government will provide Entrepreneurship Enhancement Training Programme to train 500 technopreneurs and attract more angel investors.

* Efforts will be taken to strengthen Malaysia's position as a premier Islamic capital market.

* The government will implement bold measures to revitalise the domestic capital market.

* A new landmark, Warisan Merdeka, expected to be completed in 2020, will include a 100-storey tower, the tallest in Malaysia.

* Another major project is the development of the Malaysian Rubber Board land in Sungai Buloh covering an area of 2,680 acres.

* Greater KL MRT to be implemented from 2011. When complete, public transport utilisation rate expected to rise to at least 40%.

* Another PPP project identified is the Academic Medical Centre. This project involves private investment of RM2 billion.

* Development of International Islamic University Malaysia Teaching hospital in Kuantan; Women and Children's hospital.

* Construction of a 300-megawatt Combined-Cycle Gas Power Plant in Kimanis, Sabah.

* Construction of highways such as the Ampang-Cheras-Pandan Elevated Highway.

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You Don’t Need A Broker: 9 Keys to Investing Successfully On Your Own

Source:http://millionairemommynextdoor.com/
I’m sure there are investment brokers worth their high commissions and fees, but I haven’t experienced one. I burned through five brokers before realizing that no one cares as much about my money and my future as I do. Brokers are salespeople. Naturally, they care more about their bottom line than mine.

Most people I coach don’t realize that they’ve been paying a 5-6% sales commission every time they buy new mutual fund shares because the commission is built into the price, making it difficult for the investor to “see” it. And paying a sales commission has nothing to do with the performance of a fund; you aren’t buying a better fund simply by virtue of paying more for it.

Each year, I’d compare my broker-managed portfolio’s performance with the stock market indexes (Wilshire 5000, S&P 500, Dow Jones Industrial Average, NASDAQ, MSCI EAFE, etc.). I found that despite paying a decent sum to brokers for their expertise, my portfolio usually under-performed the standard index benchmarks. In 1999, I decide that it was worth my time and energy to learn how to manage my own investment portfolio. My efforts have paid off very handsomely. Here’s a down-n-dirty summary of what I’ve learned:

1. Start Today

Start as early as possible to take advantage of the astounding power of compounding growth. By reinvesting the gains you receive from the money you invest, you can double your money in less than eight years assuming a 10% average annual return. Take a look at the following example, then try this calculator to see how much postponing your savings plan could cost you.

Start Now:
Save $10,000 per year for 30 years
@ 10% annual rate of return
= $1,809,434 ending balance

Start Later
Postpone saving for 10 years, then save $10,000 per year for 20 years
@ 10% annual rate of return
= $630,025 ending balance

Cost of waiting = $1,179,409

2. Put Your Investment Contributions on Auto-Pilot

Instruct your bank to automatically transfer at least 10-20% of your gross income to your investment account each month. If you don’t think you can afford to do this then you can’t afford your lifestyle! Get creative, cut expenses elsewhere, and start paying yourself first.

3. Maximize Retirement Account Contributions

How taxes are applied to an investment can make a big difference in the long run. There are tax advantages to retirement accounts which is why (in most cases) you should maximize your contributions to these accounts first, then add to your taxable accounts. Additionally, some employers match your contributions — which equals free money. This calculator compares a normal taxable investment to two common tax advantaged situations: 1) an investment where taxes are deferred until withdrawals are made, and 2) an investment where taxes are paid on money that goes into the account but all withdrawals are tax free.

4. Be Mindful of Fees and Do It Yourself

Invest $10,000 each year and use a broker to place your order and you might pay $575 per year in sales commissions. Alternatively, learn to place investment orders yourself and your commission savings, compounding 10% annually, would be an extra $104,042 in your pocket in 30 years. Invest in a low-cost equity portfolio using no-load mutual funds, Exchange Traded Funds (ETFs) and index funds. Even a small difference in the fees you pay on your investments add up over time. Use this calculator to see how different fees can impact your investment returns.

5. Diversify and Build a Balanced Portfolio

Speculative investments are like eggs: when they fall, they make a mess. Don’t place your bet on a single stock or sector. Spread your risk into a variety of market caps and styles as well as domestic, foreign and emerging markets. Proper diversification helps your portfolio weather any ups and downs the market can take. Asset allocation accounts for 94% of the variation in portfolio returns, while market timing and stock picks account for only 6% (Gary Brinson, Randolph Hood and Gilbert Beebower). Review and rebalance your portfolio annually to maintain your desired allocation percentages. The Asset Allocator calculator is designed to help you create a balanced portfolio of investments. Your age, ability to tolerate risk, and several other factors are used to calculate a desirable mix of stocks, bonds and cash.

6. Don’t Invest Money You Can’t Afford To Lose

Rises and falls in the stock market are normal and frequent. Don’t invest your emergency fund into the stock market because you don’t know when you’ll need to use it. Money you may need within the next few years doesn’t belong in the stock market either. Investing for portfolio growth is your long-term goal.

7. Cover Your Ass

Protect your growing wealth with adequate insurance. The number one cause of bankruptcy is major medical expenses. In addition to medical insurance, consider coverage for disability, life (consider a term policy rather than whole life), auto, homeowner/renter, business, and personal liability. Buy policies with the highest deductible you could afford to cover from your emergency fund — and invest what you save from the reduced rates.

8. Understand Your Assets and Liabilities

Most people consider the home they live in as an asset but the truth is, it’s a liability. And if you are counting on future home appreciation, it’s speculation. Stop thinking of your home as a savings account. Don’t believe the sales-pressure hype that homeownership is your best investment: you’re spending money on a property that isn’t producing income. If you insist on owning real estate as a part of your investment portfolio, buy an investment property that produces a positive monthly cash flow.

If you’re finding it difficult to squeeze your budget for investment contributions, downsize to a smaller home. Invest any remaining home equity, plus your new-found monthly savings, into your long-term-growth portfolio.

9. Don’t Invest Until You Understand

Question every piece of advice you are given through the filter of “what’s in it for them?” Unfortunately, there is no shortage of people who are skilled at separating you from your hard-earned money. It pays to be suspicious. If you aren’t committed to learning how to self-manage your investments, consider hiring a FEE-ONLY financial adviser (rather than a commissioned-sales broker) to assist you.

What I’ve offered today is a summary. I’ve shared my opinions and experiences. But don’t just take my word; ask questions and read investing books and web sites. Learn about different investing strategies and styles, assess your own personal risk tolerance, make a plan, then stick to it. Use your head — not your emotions — to guide your decisions. Practice investing first, using virtual online applications (not real money), as you wean off of your high-commission broker.

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