| (...Continued
From Prosperity 7 secrets Pt 4)
Money Skill #3. Save it
Wealth Skill #3 is to save
money. Wealthy people love to save money...you know, to buy
things at wholesale. They never like to pay retail for anything.
And now, you know why. But they don't stop there. You see,
anyone can save money by buying at a discount...but do they
save the money that they save? That's the hard part. A friend
of mine quit smoking and was bragging about the $50 a month
she was saving by not smoking. I asked, "Where is the
$50?" She didn't know. She had saved the money but she
hadn't saved it...put it away. When you save money by changing
your buying habits, take the money out of your purse or wallet
and get it out of your spending grasp. Put it into a savings
jar, and frequently deposit this money into your savings account.
That's when you've truly save/saved it.
And here's another tip. Would
you like to learn how to cut your living expenses by 30% in
30 seconds? You would? Well, take out your credit cards, put
one away for emergencies, and cut up the rest. Statistics
have proven that this simple exercise will automatically and
almost effortlessly cut your living expenses by an average
of 30% over the next 12 months.
Money Skill #4. Invest it
With the money you're save/saving
plus the 10% of the money you pay yourself off the top, you
must learn how to invest your money at billionaire rates.
Anyone can park their money at 3%. The trick is to get it
to grow at 10 to 20%. There are many traditional investments
that are ideal to park your money. At the low end of the interest
scale are bank savings accounts and certificates of deposit.
Then, you have government treasuries and bonds. Up the ladder
are corporate bonds...then the stock market...and some of
the most popular investments these days...Mutual Funds. You
should have money in all of these areas. Imagine a series
of buckets where money is siphoned off from your bathtub.
The first bucket should be your emergency bucket. Let your
10% flow there first until you have at least three months
worth of living expenses saved. You'd be surprised how many
people in this country are only one paycheck away from bankruptcy.
Don't let that be you. This money should be in the safest
place possible...probably in an insured bank account...at
the highest interest rate you can find where you can access
to your money within 30 days. Once this first bucket is filled
up, the stream of 10% will overflow into one of three additional
buckets---labeled, conservative investments, moderately risky
investments and very risky investments. If you are older,
you should have more of your money in the conservative bucket.
The younger you are the more risk you can take.
The best way to invest for
average people is in Mutual Funds. A mutual fund is a collection
of individual stocks purchased by a major company and managed
by professionals. You give them a small amount of money, they
add it to that of thousands of other investors and they watch
over it for you. You'd have to have lived in a cave for the
past 5 years not to have heard at least something about Mutual
Funds.
Here are a few rules about
investing.
The longer you invest (leave
your money in the market) the lower your risk.
Don't invest unless you're
willing to leave it for 5 years or more. It's sole purpose
is to grow and compound. Anything shorter than a year is gambling.
Remember, it's almost impossible
to buy low and sell high in the short run. So don't play the
market.
The key is long term dollar
cost averaging.
Dollar cost averaging simply
means, you should invest every single month, regardless of
where the market is heading. Don't even read the newspapers...just
buy month in and month out. Over the long run, this is the
best strategy. Do it automatically. Inform your mutual fund
company to automatically withdraw the funds from your account
each month. If you have to decide each month, eventually you
will stop the program and your future will suffer. Do it every
month.
When you finish reading this
report, if you're not already doing so, I want you to go to
a news stand, and buy a financial magazine like Money Magazine
or Smart Money or Kiplinger's. Look for an ad for a Mutual
Fund company that is No-Load...which means no commissions.
Look for ads where they will let you get started for $50-100
per month. Sign up for the automatic monthly withdrawal...and
get started. If you're new at this, you'll learn a lot by
just doing it. This will turn up your awareness of the entire
process. Soon you'll start noticing ads for Mutual fund families
that really fit you. Then, you can shift your growing nest
egg to the new company and start to watch your money grow.
Once you have gotten your mutual fund investing program funded
and on automatic pilot, you should read some great books on
the stock market like Peter Lynches classic, Beating the Market.
And then, you can start putting extra cash toward a concentrated
program of investing in individual stocks.
Speaking of that, would you
like the richest investor in the world to manage your money?
His name, by the way, is Warren Buffet. He started in the
mid 50's with just a few thousand dollars and some money from
a small group of partners. Over the next 40 years he turned
his initial few dollars into tens of billions of dollars.
His yearly compounded rate of return on his money is about
20%. If you'd like to buy into Warren Buffets brains, you
can buy into Buffets empire...where he has about 90% of his
own money. It's a stock traded on the New York Stock exchange...called
Berkshire Hathaway. It trades at many tens of thousands of
dollars per share and is the most expensive stock on the NYSE.
Buffet doesn't believe in splitting his stock price...so it
just keeps getting higher and higher...as he continues to
pile more and more money in it. (Your stock broker can show
you how to buy Baby Berkshires...at a much more reasonable
price.) There are several excellent books on the market about
Warren Buffet. If you love the stock market, you'll love to
read about how this man did it. At the very least, your goal
is to get some of your surplus money siphoned off into mutual
funds and forget them.
(Continued
in Prosperity 7 Secrets Pt 6...)
Authors Details: Robert G. Allen -
Prosperity, 7 Secrets.
His colossal bestseller Nothing Down established Robert
Allen as one of the most influential investment advisors
of all time. Also the author of 'The One Minute Millionaire' |
|
