Month to Month Living = No Money To Invest
Are you living month to month like many Americans, and never have enough money to save or even invest for the future. You are not alone. Many people, even those who are working a lot of hours find their self unable to save for the future.
While their are many ways to invest, the best solutions are always gradual and safe. Taking small steps to produce a future will produce more bang for your bucks.
Here are a few questions to ask yourself when deciding the type of investments that are best for you.
- Define your goals. Ask yourself “Why am I investing money?” Maybe you want to save money to purchase a house or to save for retirement. Maybe you would like to have money to pay for your child’s education, or just to have a financial cushion to handle unexpected expenses or a loss of income.
- How quickly can you get your money back? Stocks, bonds, and shares in mutual funds can usually be sold at any time, but there is no guarantee you will get back all the money you paid for them. Other investments, such as limited partnerships, often restrict your ability to cash out your holdings.
- What can you expect to earn on your money? While bonds generally promise a fixed return, earnings on most other securities go up and down with market changes. Also, keep in mind that just because an investment has done well in the past, there is no guarantee it will do well in the future.
- What type of earnings can you expect? Will you get income in the form of interest, dividends or rent? Some investments, such as stocks and real estate, have the potential for earnings and growth in value. What is the potential for earnings over time?
- How much risk is involved? With any investment, there is always the risk that you won’t get your money back or the earnings promised. There is usually a trade-off between risk and reward: the higher the potential return, the greater the risk. The federal government insures bank savings accounts and backs up U.S. Treasury securities (including savings bonds). Other investment options are not protected.
- Are your investments diversified? Some investments perform better than others in certain situations. For example, when interest rates go up, bond prices tend to go down. One industry may struggle while another prospers. Putting your money in a variety of investment options can help to reduce your risk.
- Are there any tax advantages to a particular investment? U.S. Savings Bonds are exempt from state and local taxes. Municipal bonds are exempt from federal income tax and, sometimes, state income tax as well. For special goals, such as paying for college and retirement, tax-deferred investments are available that let you postpone or even eliminate payment of income taxes.