HOW WE SHOULD SAVE MONEY

No matter how avidly we take care of our health, there are unexpected circumstances that can land us a day or two in the hospital. If we are not prepared and we do not have enough health insurance coverage, this can cut a great deal with our savings. Thus, it is very important that we choose the best health insurance plan that can help us in case of an emergency.

First, check out all the health insurance options that we have. Consider our family’s health needs as well when signing-up for an insurance plan. There are two types of health insurance plan that we can sign-up for: private and government health insurance options. The private health insurance is personally signed-up for by an individual. We will also have a health insurance plan when we are employed. The company will provide us with coverage as part of our employee benefits.

The health insurance coverage provided by the government may be offered on a local, state or national level. Medicare is an example of a health insurance plan offered on a national level. Medicare benefits are available for people who are over 65 years of age, and to persons with disabilities. Other government-initiated health insurance programs include: Medicaid, the State Children’s Health Insurance Program, health care benefits for the veterans and military, as well as eligible American Indians.

If we want to sign-up for a private health insurance plan, learn everything that we need to know about the coverage stipulated on our contract. Read the coverage information and check the sections stating the exclusions. Avoid signing up for one which has a long list of exclusions that would not cover much of anything. More importantly, make sure that we have a copy of every contract that we will sign. See to it that our personal information is correct and make a note of the coverage period. All in all, make sure that we have ample health insurance coverage for us to use whenever we need it.

CHOOSING A BROKER

Depending on the type of investing that we plan to do, we may need to hire a broker to handle our investments for us. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. We may wonder if we really need a broker. The answer is yes. If we intend to buy or sell stocks on the stock exchange, we must have a broker.

Stockbrokers are required to pass two different tests in order to obtain their license. These tests are very difficult, and most brokers have a background in business or finance, with a Bachelors or Masters Degree.

It is very important to understand the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow our instructions to either buy or sell stock not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you instruct our broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat per transaction fee.

There are two types of brokers: Full service brokers and discount brokers. Full service brokers can usually offer more types of investments, may provide us with investment advice, and is usually paid in commissions.

Discount brokers typically do not offer any advice and do no research they just do as we ask them to do, without all of the bells and whistles.

So, the biggest decision we must make when it come to brokers is whether we want a full service broker or a discount broker.

If we are new to investing, we may need to go with a full service broker to ensure that we are making wise investments. They can offer us the skill that we lack at this point. However, if we are already knowledgeable about the stock market, all we really need is a discount broker to make our trades for us.

ABOUT ONLINE TRADING

The invention of the Internet has brought about many changes in the way that we conduct our lives and our personal business. We can pay our bills online, shop online, bank online, and even date online!

We can even buy and sell stocks online. Traders love having the ability to look at their accounts whenever they want to, and brokers like having the ability to take orders over the Internet, as opposed to the telephone.

Most brokers and brokerage houses now offer online trading to their clients. Another great thing about trading online is that fees and commissions are often lower. While online trading is great, there are some drawbacks.

If we are new to investing, having the ability to actually speak with a broker can be quite beneficial. If we aren't stock market savvy, online trading may be a dangerous thing for us. If this is the case, make sure that we learn as much as we can about trading stocks before we start trading online.

We should also be aware that we don't have a computer with Internet access attached to us. We won't always have the ability to get online to make a trade. We need to be sure that we can call and speak with a broker if this is the case, using the online broker. This is true whether we are an advanced trader or a beginner.

It is also a good idea to go with an online brokerage company that has been around for a while. We won't find one that has been in business for fifty years of course, but we can find a company that has been in business that long and now offers online trading.

Again, online trading is a beautiful thing but it isn't for everyone. Think carefully before we decide to do our trading online, and make sure that we really know what we are doing!

DETERMINING WHERE WE WILL INVEST

There are several different types of investments, and there are many factors in determining where we should invest our funds.

Of course, determining where we will invest begins with researching the various available types of investments, determining our risk tolerance, and determining our investment style, along with our financial goals.

If we were going to purchase a new car, we would do quite a bit of research before making a final decision and a purchase. We would never consider purchasing a car that we had not fully looked over and taken for a test drive. Investing works much the same way.

We will of course learn as much about the investment as possible, and we would want to see how past investors have done as well. It’s common sense!

Learning about the stock market and investments takes a lot of time but it is time well spent. There are numerous books and websites on the topic, and we can even take college level courses on the topic which is what stock brokers do. With access to the Internet, we can actually play the stock market, with fake money, to get a feel for how it works.

We can make pretend investments, and see how they do. Do a search with any search engine for ‘Stock Market Games’ or ‘Stock Market Simulations.’ This is a great way to start learning about investing in the stock market.

Other types of investments, outside of the stock market, do not have simulators. We must learn about those types of investments the hard way by reading.

As a potential investor, we should read anything we can get our hands on about investing but start with the beginning investment books and websites first. Otherwise, we will quickly find that we are lost.

Finally, speak with a financial planner. Tell them our goals, and ask them for their suggestions, this is what they do! A good financial planner can easily help us determine where to invest our funds, and help us set up a plan to reach all of our financial goals. Many will even teach us about investing along the way. Make sure we pay attention to what they are telling us!

HOW MUCH MONEY SHOULD YOU INVEST?

Many first time investors think that they should invest all of their savings. This isn’t necessarily true. To determine how much money we should invest, we must first determine how much we actually can afford to invest, and what our financial goals are.

First, let’s take a look at how much money we can currently afford to invest. Do we have savings that we can use? If so, great! However, we don’t want to cut ourselves short when we tie our money up in an investment. What were our savings originally for?

It is important to keep three to six months of living expenses in a readily accessible savings account, don’t invest that money! Don’t invest any money that we may need to lay our hands on in a hurry in the future.

So, begin by determining how much of our savings should remain in our savings account, and how much can be used for investments. Unless we have funds from another source, such as an inheritance that we’ve recently received, this will probably be all that we currently have to invest.

Next, determine how much we can add to our investments in the future. If we are employed, we will continue to receive an income, and we can plan to use a portion of that income to build our investment portfolio over time. Speak with a qualified financial planner to set up a budget and determine how much of our future income we will be able to invest.

With the help of a financial planner, we can be sure that we are not investing more than we should or less than we should in order to reach our investment goals.

For many types of investments, a certain initial investment amount will be required. Hopefully, we’ve done our research, and we have found an investment that will prove to be sound. If this is the case, we probably already know what the required initial investment is.

If the money that we have available for investments does not meet the required initial investment, we may have to look at other investments. Never borrow money to invest, and never use money that we have not set aside for investing!

INVESTING MISTAKES TO AVOID

Along the way, we may make a few investing mistakes, however there are big mistakes that we absolutely must avoid if we are to be a successful investor. For instance, the biggest investing mistake that we could ever make is to not invest at all, or to put off investing until later. Make our money work for us, even if all we can spare is $20 a week to invest!

While not investing at all or putting off investing until later are big mistakes, investing before we are in the financial position to do so is another big mistake. Get our current financial situation in order first, and then start investing. Get our credit cleaned up, pay off high interest loans and credit cards, and put at least three months of living expenses in savings. Once this is done, we are ready to start letting our money work for you.

Don’t invest to get rich quick. That is the riskiest type of investing that there is, and we will more than likely lose. If it was easy, everyone would be doing it! Instead, invest for the long term, and have the patience to weather the storms and allow our money to grow. Only invest for the short term when we know we will need the money in a short amount of time, and then stick with safe investments, such as certificates of deposit.

Don’t put all of our eggs into one basket. Scatter it around various types of investments for the best returns. Also, don’t move our money around too much. Let it ride. Pick our investments carefully, invest our money, and allow it to grow, don’t panic if the stock drops a few dollars. If the stock is a stable stock, it will go back up.

A common mistake that a lot of people make is thinking that their investments in collectibles will really pay off. Again, if this were true, everyone would do it. Don’t count on our Coke collection or our book collection to pay for our retirement years! Count on investments made with cold hard cash instead.

INVESTING BASIC AND GOALS

When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful. Investing in anything requires some degree of skill. It is important to remember that few investments are a sure thing ñ there is the risk of losing your money!

Before you jump right in, it is better to not only find out more about investing and how it all works, but also to determine what your goals are. What do you hope to achieve with your investments? Will you be funding a college education? Buying a home? Retiring? Before you invest a single penny, really think about what you hope to achieve with that investment. Knowing what your goal is will help you make smarter investment decisions along the way!

Too often, people invest money with dreams of becoming rich overnight. This is possible ñ but it is also rare. It is usually a very bad idea to start investing with hopes of becoming rich overnight. It is safer to invest your money in such a way that it will grow slowly over time, and be used for retirement or a child's education. However, if your investment goal is to get rich quick, you should learn as much about high-yield, short term investing as you possibly can before you invest.

You should strongly consider talking to a financial planner before making any investments. Your financial planner can help you determine what type of investing you must do to reach the financial goals that you have set. He or she can give you realistic information as to what kind of returns you can expect and how long it will take to reach your specific goals.

Again, remember that investing requires more than calling a broker and telling them that you want to buy stocks or bonds. It takes a certain amount of research and knowledge about the market if you hope to invest successfully.

INVESTMENT STRATEGY

Because investing is not a sure thing in most cases, it is much like a game. We don’t know the outcome until the game has been played and a winner has been declared. Anytime we play almost any type of game, we have a strategy. Investing isn’t any different. We need an investment strategy.

An investment strategy is basically a plan for investing our money in various types of investments that will help us meet our financial goals in a specific amount of time. Each type of investment contains individual investments that we must choose from. A clothing store sells clothes but those clothes consist of shirts, pants, dresses, skirts, undergarments, etc. The stock market is a type of investment, but it contains different types of stocks, which all contain different companies that we can invest in.

If we haven’t done our research, it can quickly become very confusing, simply because there are so many different types of investments and individual investments to choose from. This is where our strategy, combined with our risk tolerance and investment style all come into play.

If we are new to investments, work closely with a financial planner before making any investments. They will help us develop an investment strategy that will not only fall within the bounds of our risk tolerance and our investment style, but will also help us achieve our financial goals.

Never invest money without having a goal and a strategy for reaching that goal! This is essential. Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If we don’t have a goal, a plan, or a strategy, that is essentially what we are doing! Always start with a goal and a strategy for reaching that goal!

STABILIZE YOUR CURRENT SITUATION BEFORE YOU INVEST

Before you consider investing in any type of market, you should really take a long hard look at your current situation. Investing in the future is a good thing, but clearing up bad – or potentially bad – situations in the present is more important.

Pull your credit report. You should do this once each year. It is important to know what is on your report, and to clear up any negative items on your credit report as soon as possible. If you’ve set aside $25,000 to invest, but you have $25,000 worth of bad credit, you are better off cleaning up the credit first!

Next, look at what you are paying out each month, and get rid of expenses that are not necessary. For instance, high interest credit cards are not necessary. Pay them off and get rid of them. If you have high interest outstanding loans, pay them off as well.

If nothing else, exchange the high interest credit card for one with lower interest and refinance high interest loans with loans that are lower interest. You may have to use some of your investment funds to take care of these matters, but in the long run, you will see that this is the wisest course of action.

Get yourself into good financial shape – and then enhance your financial situation with sound investments.

It doesn’t make sense to start investing funds if your bank balance is always running low or if you are struggling to pay your monthly bills. Your investment dollars will be better spent to rectify adverse financial issues that affect you each day.

While you are in the process of clearing up your present financial situation, make it a point to educate yourself about the various types of investments.

This way, when you are in a financially sound situation, you will be armed with the knowledge that you need to make equally sound investments in your future.

WHAT IS YOUR INVESTMENT STYLE?

Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only three specific investment styles – and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.

Naturally, if you find that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing – but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style.

Conservative investors want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts.

An interest earning savings account is very common for conservative investors.
A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won’t take. They invest higher amounts of money in riskier ventures in the hopes of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.

Again, determining what style of investing you will use will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should carefully research that investment. Never invest without having all of the facts!