Posted by Eric Twitty on October 28, 2008
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It is a well published fact that most Americans have very little or no savings. This, in my opinion, is a direct result of most people wanting to live well above their means. The problem is, over the long term this type of thinking leads to a reduction in your quality of life.
High credit card debt and living in a bigger house than you need is a sure way to continue living paycheck to paycheck. This leaves little money left over to build financial indepedence.
Stop Spending and Get Out of Debt
If you have to charge anything on your credit card, and you are not able to pay off the entire balance at the end of the month, then you are spending too much money. Stop using those credit cards and start paying down your debt.
The first thing you have to do is cut down on spending. Sit down and write out all of your bills and necessary living expenses. Whatever is left over you should use to pay off your credit card debt.
Start Saving and Investing
Once you are out of debt, then you can begin putting money in the various investment vehicles that have proven to appreciate in value over the long term.
Where should you invest your money? There are many choices out there. The best thing to do is talk to a licensed financial adviser if you are not educated on the various types of investments.
I think it is an absolute necessity to contribute the maximum amount to an IRA each year. An IRA is a tax-deferred investment which is an enormous advantage for long term capital growth. I think it is also important to have at least three month’s living expenses saved in a high yield savings account. Once you have enough in your savings account, and you have contributed the maximum amount to your IRA, you can then begin to put money in various investment vehicles that suit your return expectations and risk tolerance.
Develop a Disciplined Savings Approach
Think of your savings plan as a bill that you have to pay. If you have $500 left over to save, then make it a point to write a check for that amount at the end of the month to one of your investment accounts. Don’t miss a month.
Once you do this for awhile it gets kind of fun to watch your savings grow. You begin to feel better about your financial situation. Every month that you write that check, you take a positive step towards becoming financially independent.
Don’t Spend It
You must resist the urge to spend the money once you have a decent amount saved. Don’t spend your money on things you don’t need. Put that money to work for you so one day you can afford whatever you want!
Posted by Eric Twitty on October 23, 2008
If you have ever wanted to start investing some of your hard earned money, the time is now. Stocks have taken a plunge and there is a lot of value in the market right now.
If you are new to the investing world the first thing you should do is open an IRA or Individual Retirement Account. The money earned is tax deferred meaning you don’t pay taxes on capital gains or dividends until the money is withdrawn. There are restrictions on how much you can invest annually but you should do whatever you can to maximize your contributions.
Don’t rely on social security to get you through retirement. Put up as much money as you can to ensure that when you retire you can enjoy your life and do the things you want.
There is a great article over at The Motley Fool that will tell you everything you need to know about IRAs. Here it is:
Fool.com: All About IRAs
Read this article then get out there and get started. Don’t let this opportunity that the stock market is giving you pass you by. Pick up some of these stocks and mutual funds while they are still cheap. Don’t be afraid. If now is a good enough time to buy for Warren Buffet, the richest man in the world, then now is a good time to buy for you.
Posted by Eric Twitty on October 10, 2008
With the financial crisis going on in today’s economy, there is a lot of fear and panic out there. I know it seems like the economy is getting worse every day.
Where is the bottom of the stock market? You can find many “expert” opinions but no one really knows. Picking bottoms and tops in the markets is impossible. Here are some helpful ideas to get you on the right track.
Look for Opportunities
Focusing on all the negative things going on in the world today is not productive thinking. You need to look for opportunities. Stock market prices are extremely depressed right now. Are there buying opportunities? There are some companies out there with solid balance sheets whose prices are discounted. If you liked a particular company a year ago and you still like it today you should buy some shares. They will probably be deeply discounted.
Most mutual funds have been deeply discounted also. This may be the way to go if you don’t have any knowledge or experience in picking stocks. Just look for a fund with a good track record and buy some shares. Don’t worry about their current performance. Most mutual funds have been forced out of some of their holdings by people redeeming their money. This has really hurt their performance through these rough times.
Take a Long Term Approach
You need to take a long term approach to the market. It could continue to go lower in the short term, but in the long run the market has historically performed very well. What we are seeing is panic across all financial markets. Once the panic dies down, people will realize that there are some good buys out there.
Investing in the stock market is about aquiring assets that appreciate in value over time, and hopefully earning some dividends in the mean time. Don’t worry about what happens in the short term. If there are companies out there that you wouldn’t mind owning a piece of, then buy some of their shares.
Have the Courage to Do What Most People Won’t
There are opportunities out there. Those who have the courage to buy in these bad economic times will be rewarded in the future. Remember to “buy when the man on the street is selling, and sell when the man on the street is buying.” Most people get in the stock market after it has performed well for a long period of time. Have the courage to do the opposite and you will be rewarded with solid returns.
Posted by Eric Twitty on October 9, 2008
You always hear from people selling trading systems and programs on TV and on the internet that you should take charge of your financial future, don’t let someone else manage your money, you can do just as good a job as they can. This is what they tell you.
Let’s think about that for a minute. You probably have a job. You are probably very good at what you do. Unless you happen to have the same job as me, I probably couldn’t do your job without extensive training. People don’t tell you not to hire an accountant to do your taxes and that you can do it on your own. They usually recommend that you hire an accountant. Why? Preparing your taxes requires specific knowledge that you generally wouldn’t have unless you are an accountant. Doctors, lawyers, pro athletes etc. all go through years of extensive schooling and/or training to become proficient at what they do. The same applies in trading. It takes knowledge and practice. It is a highly specialized profession.
Think about what you do for a living. Can just anyone do what you do? Sure there are other people out there that can but can everyone? I don’t think so. You probably spent considerable time and money learning the skills necessary to do your job. Why is it that you hear that trading for yourself is a good idea?
Anybody that has ever traded can tell you that it is one of the most challenging things they have ever attempted. It takes time, dedication, and specific knowledge of the markets to just break even. Even if you can devote yourself to the markets full time there is no guarantee of success. Trading futures is a zero sum game (excluding commissions and fees). One trader loses money, another trader makes money. It is said that 85-90% of all traders lose money. So that means that 10-15% of traders are taking money from everyone else.
When you trade, you are trading against full-time professionals, who have the knowledge and risk management skills necessary to trade successfully in the markets. Would you put your money on the line against a professional in anything else? Would you put money on the line that you could beat Oscar de la Hoya in the boxing ring, or that you could beat Tiger Woods in a round of golf? Probably not. So why is it people insist on competing with professionals every day in the financial markets?
Don’t get me wrong, you can trade successfully in the markets. Anyone who is willing to put in the time and effort necessary can learn to trade profitably. But, you must be willing to invest years and thousands of dollars into learning how to trade successfully, so possibly one day you can sit in front of a computer screen all day and trade your own account profitably. Otherwise, I suggest letting someone who has already shown to be profitable over time trade your money for you. Trust me it will be less stressful, and give you the time to do what you want to do with your life.
Trading isn’t as easy as some TV commercial or internet ad would have you believe. They are just trying to sell a product. People that buy these products learn very quickly though that it takes much more than what is given in the product to be successful.
Trading success is very dependant on a person’s ability to control his or her own emotions. That is something that can’t be easily taught in a course. They can give you suggestions, but it takes experience to truly become a master of your emotions.
People that trade for themselves often throw money at trading ideas that don’t work out. They have a gambling mentality. Sure, gambling can be fun, but it’s usually not profitable. There are few gamblers that consistently take money from the casinos.
The same is true in trading. Professional traders separate themselves from the general public by taking a methodical, disciplined approach, and using sound money management principles to profit over time. The good news is that these traders are willing to trade for you for a portion of the profits.
I understand why people trade even when they don’t do it successfully. It’s fun and challenging. The dream of financial freedom is a big motivating factor. I’m not saying everyone would be better off letting a professional trade for them. If you enjoy trading, go for it. I do encourage you if you are considering trading for yourself to give serious thought to it before you attempt it. The odds are definitely against you unless you are adequately capitalized and disciplined in your trading approach. There is money to be made in the financial markets and investing is a key to becoming financially independent. But, in my opinion, most people are better suited to leave it to professionals, who have proven they can consistently manage risk and be profitable over a period of time, through a documented track record.
Why try to be in the 10-15% of winning traders when you can let someone who already is a winning trader trade for you? There are plenty of talented money managers out there that want to trade your money. Trading is their business. Their performance is documented. While past performance is not indicative of future results, it does give you some insight into the ability and trading style of the money manager.
There are plenty of managed products out there to choose from. Whether is mutual funds, hedge funds, managed futures, or index funds, there is something out there for you.
