Seven Best Decisions You Can Make About Money
By Al Jacobs
When this title was first suggested to me, I instinctively blurted out: "I can think of only one best decision . . . acquire as much of it is you can!" I've since reconsidered; there are others.
1. Don't spend what you don't have. First and foremost, regularly spend less than you make. Consider a local mattress dealer that advertises on radio and TV. His madcap skits, offering "no deposit, no interest, and no payments until . . . whenever," are hilarious. However, I shudder at the thought that someone actually purchases an unaffordable product, gambling that in a year or so the full purchase price can be paid so to avoid scheduled fees and retroactive interest. It's a recipe for disaster.
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2. You'll find your financial helping hand at the end of your arm. A half-century ago, the average American anticipated retirement through an employee pension fund, supplemented by social security. Much has since changed since. Many employers, for sheer survival, are under-funding their pension programs and ridding themselves of employees. And with Social Security rapidly evolving into a welfare system, there is little outside assistance to count on. The significance is clear: Fund your own retirement through regular savings and sound investments. Fashion your life so that part of your income is not consumed, but available for the future. You must do this yourself; don't expect help elsewhere.
3. Arrange to make your money grow. The adage that time is money is accurate; it depicts the earning power of money astutely invested. Let me suggest a method. Open a self-directed brokerage IRA account-preferably a Roth if you're eligible-in which you accumulate certificates of deposit, treasury notes, and high grade corporate bonds. Begin at an early age and pursue this program systematically through your working years. An annual contribution of $4,000 invested at 7.5 percent, compounded semiannually over the 40-year period from ages 25 to 65, results in more than a million dollars. It's the compound interest that brings this about, a phenomenon as close to magic as you'll ever encounter.
About the Author:
AL JACOBS has been a professional investor for more than four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody's Fool: A Skeptic's Guide to Prosperity. You may subscribe to his financial Newsletter, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com.
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