Investing

Why You Should Diversify

diversify

Be ready for the next Enron

The other day I was on Netflix scrolling though all the options and trying to figure out what to watch.  I like watching series on Netflix because I know exactly what I’m going to watch and I don’t have to waste time scrolling through the options.  But I had just finished watching the last season of Peaky Blinders – which is awesome btw – and I like to give movies and/or documentaries a chance before jumping into another series binge.

This quest lead me to a documentary about Enron titled, “Enron: The Smartest Guys in The Room.”  I have to admit that even though I had heard about Enron – I knew it was a large company that went bankrupt in a matter of days because of some type of corruption – I didn’t know what really happened.

I should have known this because it was such a big scandal, but I just wasn’t interested in anything related to finances, money, or investing at that time.  Now I blog about personal finances, money, and investing so I decided to be more informed about these things.

I recommend everybody to watch this documentary or read more about Enron’s collapse because it taught me a few things.

How To Invest $1000 or Less

invest $1000

It’s Easier Than You Think

Many people hear the word “invest” and automatically move their hands over their pockets to make sure their money is still there.  I was one of these people. I was so afraid to lose my money that I never even considered the potential earnings I could gain by investing.

Investing is risky and anybody that tells you otherwise is not telling you the truth.  But you can minimize that risk by knowing how to invest and where to invest.  Picking the right funds or stocks and having a solid asset allocation strategy doesn’t eliminate the risk that you will lose money, but it can minimize it to the point where you can sleep soundly at night.

10 Common Money Mistakes

Money Mistakes

Money Down The Drain

You would think that since we handle money on a daily basis we should be experts on money, but the reality is that we make a lot of money mistakes that lead to us losing our hard earned money.

If you read my story, you know that I made a lot of money mistakes that kept me living paycheck to paycheck every month.  Fortunately I have rectified some of those mistakes, but I’m still working hard to get on the path of financial independence.  Below is a list of common money mistakes I’ve made and that you should avoid.

Saving For College

Save For College

It’s easier than paying for Student Loans

It is graduation season – quite an exciting time for many families – and depending on how you planned to pay for school it could be a relief or a financial burden.  I just read an article where a couple accumulated around $500,000 in debt to pay for their children’s college education – that’s cray-cray!  I also hear a lot of co-workers talking about how much their kid’s college tuition cost and how they are broke because of it.

I understand we want the best for our children, but going into debt for them might not be the smartest move.  There are plenty of ways our children can obtain a college education without having to put a dent in our savings – we just have to plan ahead.

According to a recent study conducted by Sallie Mae and Ipsos – How America Saves for College – only about 50% of families with children under the age of 18 are saving for college.  The study also shows that out of those who are saving, about 75% are not utilizing the best options when saving for college.

Asset Allocation – Where Do I Invest My Money?

Asset Allocation

What’s The Right Asset Allocation?

When I started my first job out of college, they told me I was automatically enrolled in the company’s 401(k) plan.  I just had to decide what percentage of my salary I wanted to contribute and where I wanted my contributions to be invested.  I then received a package from the company handling my retirement plan. There were pie charts and graphs and numbers that I didn’t understand explaining the different options I had to invest my money.  I looked at all that information and started to panic a little bit.  Where do I invest my money? I don’t want to invest in the stock market.  I’ll lose all my money.  The package also explained that if I didn’t choose anything then my funds will be placed in what looked like a savings account.  So I chose the default because I didn’t know what to do.

I now know that picking the right fund is really not that difficult when you know what to look for.  Here I am going to share with you what I have learned so we can have a better understanding of the choices available to us and about how to diversify our funds to lower our risk.  I will mostly touch on investing in our 401(k) but the information applies for investing outside of your retirement account as well.

The Powerful Force of Compound Interest

“Compound interest is the greatest mathematical discovery of all time” – Albert Einstein.

  albert-einstein-about-his-quotes

 

He probably didn’t say that but I’m going to say it because to me, it was.  And this is how I plan to have a Million Dollars in savings one day.  Now, if you are looking for a way to get rich quick then this site is not for you.  Our plan is to slowly build our savings and not touch it to let compounding do its magic.  All we need is discipline and time… lots of time.  So be patient.  Just start saving early, often, and for a long time.

This is the one of the ways we normal working people become rich.

I decided to write about compound interest first because once we understand its power then all of our saving strategies will make more sense.