When should I start investing?

The popular belief in our culture today is that we should start investing as early as possible.

Generally speaking that is true, howeve , we want to look at the whole picture before jumping off the bridge.

1. Do I have a sound budget?

      If not, delay starting investments until you have identified where the money is coming from.

2. Do I have any debt?

     If you have a sound budget and debt is restricting your discretionary money,

     then start a systematic debt reduction plan. there are many books on the subject.

     The guest bloger ’s website has a free debt reduction planning area.

     Pay down or pay off all consumer debt before tackling investments.

     Paying consumer debt at the same time as investing is counter productive.

      What you earn and more may be eaten up by the interest you pay.

How should I choose what kind of investments to use?

We will not be going into great detail here in this blog on specific investment vehicles.

There are several basic groups of investments.

Savings

The most popular and widely known is a savings account at our local bank.

Everyone should have at least $2,000.00 in a savings account for emergency purposes.

You might choose to have more, but at least $2,000.00.

Bank or Savings and Loan savings accounts are relatively safe and earn a relatively small return. They are totally liquid and simple to understand and easily accessed.

Money market accounts pay a little more interest and generally are still very liquid.

They can usually be opened at your local bank.

Certificates of deposit (CD’s) yield greater returns the longer you commit to keeping them. CD’s are less liquid and have substantial penalties for early withdrawal.

Securities

Stocks, bonds,  and commodities are traded in the market. They offer potentially higher yields and potentially greater risk. These are purchased through licensed securities brokers or agents.

Mutual funds are the most common and widely known of security market sensitive investments.

Seen most often in 401k’s ,403b’s, 457’s and so forth ( Employer- employee based retirement/ savings plans. They are also used to fund many IRA’s and Roth IRA’s.

Mutual funds are intended to somewhat minimize risk through diversification ( spreading risk) while still affording the invester the possibility of greater gain.

Mutual funds make up probably the bears share of securities today and are easily purchased through employer plans, banks and brokers.

Caution! you should be aware there is a substantial risk of loss in these areas of investment. They should not be purchased without considerable caution.

Insurance based investments

Among this catagory of investments are annuities and insurances.

Annuities are broken down into 2 major catagories, Fixed and Variable.

Fixed annuities are generally very safe and produce a lower yield. A relatively new catagory of annutiy is the fixed indexed annuity. Still very safe while showing a very promising yield.

 Variable annuities are funded with mutual funds and have a substantial risk while affording a greater potential gain.( They generally have high fees and “hidden” fees).

Single Premium Life insurance has some unique benefits like tax minimumization or elimination and no risk earnings vary from policy to policy, but are generally good.

They are most often used to pass the death benefit along to beneficiaries and avoid or reduce the tax on the death benefit.

There are many other details and topics far too lengthy to explore on this forum.

Contact several advisors before deciding. Each, of course, will be happy to give you their perspective. Do not be rushed!

Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.

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