Minding Your Ps and Qs (Your Personal Quest for Fortune

It’s never too early to starting financial planning. Financial planning is really putting your money to work for you. You need to learn how to invest, no matter what shape the economy is in at the time.

Benefits of Financial Planning

The benefits of financial planning are many. You will be able to prevent debt disease, which like any other major disease, eats at your financial health and well-being. You will be able to put away money for the things that are important to you. You will be able to reap the profits of compounding interest to build a sizeable fortune for your future.

First Steps to Take

Think about what your short-term, medium-term, and long-term goals are. Estimate how much money you’ll need to meet those goals. Assume a five percent addition for inflation that will make items cost more ten years from now than they do now.

Decide Where to Put Your Money

Once you determine how much you need to save, decide on where you’ll put your money in order to earn the interest/dividends that will increase the value of your savings.

There are many ways to invest your money. Investment vehicles include Certificates of Deposit (CDs), Money Market Funds, tax-deferred retirement plans such as Individual Retirement Accounts (IRAs), Government Savings Bonds, and the mutual funds, bonds and equities in the stock market. (Individual circumstances vary. Always consult a tax advisor when making tax-related investment decisions.)

CDs are a special type of deposit account with a financial institution that normally offers a higher rate of interest than a regular savings account. You deposit a fixed sum of money for a fixed period, as low as $1,000 for as little as six months. Money Markets are mutual funds that invest in short-term (less than one year) debt securities of agencies of the U.S. Government, banks, corporations and U.S. Treasury Bills.

You may think it’s too early to start thinking about IRAs but it’s not. These are deposits you make into an account (which can consist of a medley of all kinds of investment vehicles) where the interest earned on the investments goes back into the IRA account.

Savings Bonds are issued and registered by the U.S. Treasury Department where the government takes the money you spend on the bonds and uses it to pay for things it needs to do, such as building ships, tanks and planes. The benefits of savings bonds are that they are tax-exempt, the principal and earned interest is guaranteed by the U.S Government, they earn market-based interest rates keyed to the five-year Treasury securities, and you can begin investing for as little as $25.

Mutual funds, bonds and equities are all stock market vehicles so they are both more risky and potentially more rewarding than bank or government-only investments. Bonds can be purchased from both corporations (where companies need to borrow money) and from entities such as cities (known as municipal bonds where the city needs money for construction of a new school, for example). Mutuals are groups of stocks and/or bonds usually within a specific industry or a certain focus, such as technology, emerging markets, biotech, etc. Equities are stocks that give you a percentage ownership in publicly-traded companies.

For More Information

For more information, check out the library on base. The Internet is full of helpful information. Use “investing” as your primary search term. The U.S. government supplies a wealth of information for free. Go to www.firstgov.gov or, for bank investments, www.fdic.gov.

Investing your time and effort in learning about the various investment vehicles will maximize the return on your investment. Don’t give up. After all, it’s your personal quest for fortune.

Source: Omni Financial®