Piggy Banks, Coffee Cans, Stocks and Bonds

Investments can take two basic forms. First, an investment can be the purchase of goods, supplies, tools, or equipment to use in the production of increasing profits. For example, a businessperson who produces shoes may purchase a machine that automatically stitches leather in the hopes that the time saved will allow for the production of more shoes and increased sales.

The second basic form an investment can take is what most of us think of when we say we are investing our money. That is, we use the money we have for the specific purpose of making more money from it.

There are several different ways of investing money in the hopes of gaining a profit. Stocks and bonds, exchanging currencies in the Forex market, annuities, certificates of deposit, mutual funds, buying real estate to sell at a profit later (Flip That House!), IRA’s, even simple savings accounts, are all methods of investing. Even loaning your brother-in-law a few bucks (at a reasonable interest rate) to start a business is an investment.

Generally speaking, the riskier the venture is, the more opportunity there is to make a higher profit; the less risky, the lower the proceeds. The FDIC guarantees savings accounts and therefore, putting your money in a savings account with the idea that you will get a fantastic return on your money is not very realistic.

A savings account has little to no risk whatsoever; therefore, the return on investment is weak. Of course, it’s always a good idea to have liquid assets, and a savings account is one way to do so. Most middle-class Americans should have enough in their regular savings account to tide them over in the event of an emergency or job loss.

• *Quiz: Does putting your money in a coffee can and burying it in the backyard qualify as an investment? (see answer at end of article)

Purchasing stock in a company makes you part owner of that company. The two ways to make money from owning stock are to secure dividends and/or sell the stock for a higher price than what you paid for it. Sounds simple, right? Well, the basic concept is quite simple; it’s the day-to-day reality of the stock market that makes this type of investment a bit more complicated. There is no guarantee whatsoever that the stock you choose will make a profit. In fact, you can easily lose your entire investment. The potential for a tremendous profit exists, however, if the stock (company) hits the big time.

• **Quiz: Which is riskier? Loaning money to your brother-in-law or buying stocks by closing your eyes and pointing? (see answer at end of article)

When you are deciding how to invest your money, the two major considerations are how
much of a return on your investment you want to see and how much risk you are
comfortable with. Once those two questions are answered, it is time for you to seek out
an investment professional and start making yourself some money.

• No, sorry Jed Clampett. The coffee can qualifies as hiding or saving, but not investing.

• ** It depends on your sister’s taste in men.

Retirement Savings - Tips To Get To Your Pot of Gold

At the start, safety features were not needed in car design. Neither was it needed in a 401(k) account, but that is no longer true.

Here are some suggestions and things to watch out for:

1. Save automatically

Twenty five percent of eligible workers do not or decline to sign up for a 401(k) plan. Workers who do not sign up are risking their future. Plus, approximately $30 billion are left out in the form of company contributions.

If only a few rank-and-file workers participate, the higher-paid workers contributions are limited as stated in the IRS rules. An increasing number of companies have made 401(k) enrollment automatic. Employees can still choose to opt out.

Twenty five percent of large companies have employees automatically enrolled in the 401(k). Although, this would mean that many of the new employees are in a very conservative investment that may not be enough to beat inflation.

If you’re one of those higher-paid employees, you may want to move your money into a stock fund to take advantage of long term growth. You may also want too boost your contributions each year until you max out.

2. Simplify your investment

During the late 90s when the stock market was rising, providing workers with more investment choices was the rage. A few companies introduced new options and some offered ‘brokerage windows’ letting employees invest their 401(k) savings in an array of funds and stocks.

True-blue investors loved the choices and unfortunately drove up costs with the increased amount of trading. Majority of the workers didn’t make any choice at all.

If you don’t want to mess up your 401(k), simply tell your company to add a life-cycle or a target-maturity fund. You can also invest your savings in a balanced-fund option. A 60% stock to 40% fixed-income ratio is still a good choice.

3. Seek a low-cost alternative

Anomalies on mutual funds and awareness of high, hidden fees are making a few employers explore other forms of savings beside mutual funds. A commingled fund is an option that is available wherein the service provider combines small employer contributions to reduce costs.

The problem with commingled funds is that it isn’t publicly traded and investors usually have less information about how the money is invested. When your plan is offering mutual fund alternatives, make sure to compare costing for long and short term plans

Ways to Save Money That Really Work

In these hard times, money is hard to come by so you should know how to save it until things get better. Since it is a balancing act that is somewhat challenging, here are a few ways that can teach you how to save money.

If you don’t want to lose your home like a lot of Americans have over the past year, you have to kill your debt first. You do that by calculating how much money you spend in a month and then see where the budgets can be made so there is money you can use to pay off those debts.

So you know you are reaching your goals, keep a record of all your expenses. To avoid confusion, write down each expense in a specific category like cable Bills, car insurance, car payments, entertainment, food, gas, phone Bill and rent. Keep it with you at all times and then balance it with every receipt.

But what if cutting down certain expenses is not enough to make you debt free? When this happens, you have to make bigger sacrifices like moving to a less expensive home, cancelling your land line or cable, not going out for some time and eating at home more often.

For those who are renting, try to invite someone to share the place with you so that you can share the rent.

Having a credit card or more than one is the reason why a lot of people are in trouble. This is because they only pay the minimum so whatever is left becomes higher because of interest. If you have a credit card, stop using it.

Right now, pay everything with cash that you have on hand. You can even do what some people practice at home and that is to bundle a certain amount and put a label on it or place this in a jar. That way, they know where to get it and be aware of how much is left since this should last for about a month.

There are even some who put a label on their wallets reminding themselves to save by writing on some tape that they have no money.

Saving money shouldn’t only mean cutting expenses. It also means earning a little more with what is available and you can do that by opening an interest-bearing savings account. This is different from the regular savings account and the best part is that the interest rates are much higher. Your other options are CDs or money-market accounts for longer savings goals.

The keys to saving money are discipline and self-control especially when the country is in a recession. If you have a job, good for you but think about the millions of Americans who don’t and have to live on unemployment checks until they are able to get a another job.

So set a goal and then stick to it. The objective here is to survive this crisis so you can keep a roof over your head and food on the table. If you need help, get a financial expert to help you plan how to budget things because it is their job to help you find answers when you are running out of options. You just have to do your share to make it happen since you know a few ways to save money.