“Real World” Personal Strategy Blog

Do This Automatically–And Thrive

“We come to love not by finding a perfect person, but by learning to see an imperfect person perfectly.”<em>- Sam Keen</em>

It’s a glorious spring morning, as I write this, and once again…I’m reminded of the newness of every week. It’s really true that no matter what happened the day before–we get a new day, NOW!

Imagine if we there were no “day and night”, and all we had was one lo-o-o-ong day. The phrase “having a bad day” would be much more serious!

Well, it’s not like me (a tax person) to get so philosophical so suddenly, but I’m simply grateful today for new beginnings. Remember…whatever happened yesterday (or whatever happens TODAY for that matter), there’s always <strong><span style=”text-decoration: underline;”>tomorrow</span></strong>.

Speaking of the future, could we be continuing to see the much-promised recovery? Not clear, but this article says the answer is … mixed: <a href=”http://bloomberg.com/apps/news?pid=20601109&amp;sid=aDyuaXtothZw&amp;refer=home”>http://bloomberg.com/apps/news?pid=20601109&amp;sid=aDyuaXtothZw&amp;refer=home</a> .

Further, I often get asked about what I see happening to the tax system over the course of the next couple years, and my short answer is that we won’t be seeing anything radical…but that the upper brackets will continue to be “unfriendly” (which, of course, is why it’s always so important to have a professional help you navigate them!).

Anyway, this article is helpful–it shows how the new budget proposals give some “tip offs” related to the administration’s thinking regarding the future of the tax code.

Finally, in this week’s Strategy Note, I’m picking up from last week’s initial primer on investing. Based on feedback, you seemed to like last week’s installment. As I mentioned last week, however, <span style=”text-decoration: underline;”>WARNING</span>: though basic, this week’s installment particularly requires some financial thinking.

But I promise it’s a good “investment” of your time!

<strong>”Real World” Personal Strategy</strong>

<strong>Simple Steps To Start Investing (Part 2)</strong>

As I mentioned last week, there simply isn’t a better time to invest than today.

I gave you two first steps for investing last week:

<strong>1) Getting investable money together.</strong>

<strong>2) Open an account where you can do your investing.</strong>

<strong>In step 3, get money into your investment account–regularly.</strong> Many brokers allow you to link your checking account to your investment account electronically so you can transfer money at any time. Better yet– set up an *automatic* monthly transfer. A day or two after your paycheck is deposited into your checking account, an amount you have designated is automatically transferred into your brokerage account.

The principle here is to “<span style=”text-decoration: underline;”>pay yourself first</span>.” You deserve to build wealth, and wealth is what you save and invest, not what you spend.

In fact, it’s helpfully to think of a very rich person simply as a poor person who has saved a lot of money. Invest as little as $100 a month for 46 years earning 10%, and you can retire with a million dollars. And $500 a month grows to an astounding $5 million.

Those 46 years of investing ideally take place between ages 20 and 66. If you are beginning later in life, you may have to invest more to save the same amount. In fact, for every seven years you delay saving and investing, you cut your retirement lifestyle in half (this is, of course, according to averages–there’s always exceptions. One significant exception is the reward many individuals reap from starting their own business.)

So here’s my challenge: <span style=”text-decoration: underline;”>Today is the day to decide if you want to be financially free!</span> I can’t emphasize enough that time <span style=”text-decoration: underline;”>in</span> the markets is more crucial than <span style=”text-decoration: underline;”>timing</span> the markets. Who among us doesn’t wish we had invested as much as possible in the markets at the prices 46 years ago?

Push yourself to invest as much as you can, automatically each month. This seems harsh, <em>but no one should save less than $100 a month in their taxable savings</em>, and this taxable savings is in addition to any work-related retirement accounts.

After you have begun adding money into your taxable savings account, it’s time for <strong>step 4, the actual investing.</strong>

Knowing the best mix of investments requires a great deal of research and analysis. Investment advisors can add significant value for large portfolios. But for small amounts when you are just getting going, how much you save each month is more critical than the asset allocation you select.

To pick a fund, go to <a href=”http://www.maxfunds.com/”>www.maxfunds.com</a>. This is an excellent “layman’s” site for fund analysis. In the drop-down box “Show me these funds” select the category you want to purchase. I will tell you which categories to purchase later, but for now assume you know. Next, in the drop-down box “That are sorted by,” select “Highest MAXFunds Rating.” Finally, click “Go.”

The tool lists many investment choices, ranked from their highest score downward. If you can invest at least $2,000, buy an exchange-traded fund. These funds are purchased with a transaction fee ($8 to $20). The amount you are purchasing should be significant enough so the transaction costs to purchase the fund are well under 1% of your initial investment. For amounts less than $2,000, consider waiting and accumulating more to invest or else purchase a no-load mutual fund without any transaction fee.

The site puts a yellow star next to their favorite fund, which is a good place to begin. If you are evaluating funds on your own, look for a fund where the TYPE is ETF and the expense ratio (EXP) is as low as possible. That is often the best choice of a fund. The lower the costs, the more you will keep of the return.

Now…that’s the limit of the expertise which I can pass on, and for what works in an article like this. If you want FURTHER advice, please do contact me–we’ll be able to point you in the right direction.

See you next week, in which we won’t get so technical!

<em>To more of your money in your wallet!</em>