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| Congratulations! |
| You've taken an important
first step by recognizing that you need to start working
on financial security - and looking for information to
help you take action. But don't stop now! Just follow along and you'll see how simple it is to start planning for your future. |
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| Defining Your Goals |
The next step is to define
your goals. Sit back, take a deep breath and close your
eyes. Now imagine where you want to be in five, 10, 20,
30 or 50 years.
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| Reining in Debt |
| One of the first steps many
people need to take is to rein in their debt. After all,
if you're paying an interest rate as high as 18 percent
to 25 percent, paying off those high interest loans
should be a top priority. You might find it helpful to
list all your credit card balances, high interest loans
and other debts on a sheet of paper. Then beside each
debt, list the interest rate you're paying. If you
consolidate your debts and negotiate a lower interest
rate, you'll be able to pay it off faster. And whatever
you do, pay off the highest interest loans first! Other resources: http://www.powersource.com/cccs/default.html The Debt Consolidation
Organization at |
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| Reaching Your Goals |
| Once you know what you want
and you've reined in your high interest debt, it's time
to think about how to reach your goals. Usually, you need
to begin by investing. "Wait a minute," you say. "I don't have any money to invest!" Take a closer look at how you're spending your money...
Figure how much you spend on a weekly or monthly
basis, and then start looking for expenses you can draw
from for your investment account. Take a little from
here, a little from there, and it all adds up. Remember,
compounding makes each investment dollar grow. |
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| The Magic of Compounding |
| If you need a good reason
to get started right now, you should take a few minutes
to understand the magic of compounding. This powerful
force comes into play when you save or invest - and it
means that starting now could mean huge pay-offs later.
Imagine a snowball that grows larger as it rolls
downhill, and you've got a good idea of how compounding
works. Your savings and investments grow in two ways: from returns or interest earned on the original investment and from returns or interest earned on the returns or interest from that original investment. That means a dollar saved or invested today is worth a great deal more than a dollar saved or invested 20 years later. |
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| Where to Begin: IRAs |
| But where should you begin?
If you haven't already done so, your next step should be
to set up an Individual Retirement Account (IRA). In
today's world, it doesn't make good sense to count on
Social Security and your employer's retirement plans to
provide you with sufficient retirement income. You can invest the money you put into your IRA in your vehicle of choice-- mutual funds, individual stocks, bonds, certificates of deposit... you name it. One of the benefits of an IRA is that IRA contributions may be deductible from your current taxes, depending on your income and whether or not you have a retirement plan through your employer. You have a choice of different types of IRA accounts. The traditional IRA allows you to make a contribution of up to $2,000 each year. The income and growth in your IRA are tax-deferred until you make a withdrawal, typically when you're ready to retire. You may be eligible for the Roth IRA, which allows you to make non-deductible, after-tax contributions. The benefit is there's no tax on earnings from your Roth IRA investments, and any withdrawals you make are tax-free, with some restrictions. If you anticipate being in a higher tax bracket when you retire than you're in today, you may find long-term benefits in converting a traditional IRA to a Roth IRA. But move quickly! There are special tax benefits if you convert in 1998. The Rollover IRA allows you to maintain the tax-deferred status of your company retirement plan when you move to another company or retire. That means you aren't required to pay penalties, taxes and withholding fees. To open an IRA account, contact your bank, financial investment firm or a financial adviser. You can also conduct a search on the Internet by entering "individual retirement account" on your favorite search engine. You'll find a list of banks, insurance companies and financial investment firms that offer information about their products and services. Many of these sites have toll-free numbers you can call for answers to specific questions on how to establish an IRA. |
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| Making the Right Decisions |
| Making
smart investment decisions requires knowledge and a clear
understanding of your choices. Some of the
decisions you make will last a lifetime and determine how
soon you'll reach your goals. When you're ready, choosing
to work with a financial adviser could be one of the best
investment decisions you make. A financial adviser will
help you to clarify your financial goals, set your
priorities and develop a plan to reach your objectives. Your financial adviser will evaluate your financial goals and recommend the best ways to achieve them. You also have choices about what type of financial adviser to hire and the way you pay for the advice. If you're ready to seek professional advice now, click here. But if you're not quite ready to pay for professional advice, you might want to check out one or two of these books from the International Association for Financial Planning's recommended reading list. The Wealthy Barber by David Chilton The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. Make Your Paycheck Last by Harold Moe The Richest Man in Babylon by George S. Clason Think and Grow Rich by Napoleon Hill |
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