Interest and finance charges lead to getting discouraged about your overall financial situation. All of these problems occur once you let yourself fall behind on your payments. Whether it’s normal monthly bills, credit cards, or student loan payments, falling behind on your payments can be a difficult problem to dig yourself out of. The more money you sepnd on finance charges, the less money you have to invest in your future.
If you don’t know where you are headed, how on earth do you get there? In order to begin building wealth, you need a roadmap. Write out your goals, very specifically, including a way to achieve them, and you’ll be on your way to wealth building.
The greatest thing you can do for yourself is to start early. Even if you can’t invest much, start with what you can (even $5 per week) and let your money begin to grow.
Whether you are looking to invest in real estate, stocks, or gold and silver, make sure you know how the investment works from top to bottom. If you don’t understand the company's business model, what the company actually does on a day to day basis, or how it generates revenue, then do not invest a single penny in it. This principle should be heede at all times and applied to all the different types of investing.
When everyone is talking about an investment, that is generally when the smartest investors are getting out of their position. If everybody understands a stock is hot, or that the real estate market is booming, it generally indicates an economic bubble. In other words, it is time to cash out. Investors make money buying low and selling high. If an investment is already hot and lots of money is flowing into it, you aren't buying low.
Don’t get greedy with your money. This is easier said then done, but don’t try to be a hero with your investments and take on too much risk. Building wealth takes time and dedication to your craft. There are no shortcuts or easy ways to get rich.
This is one technique that sounds really basic, but can be really difficult to achieve. Most people want instant gratification and go out to treat themselves on a regular basis. Before you start spending that money burning a hole in your pocket, try to save 30% of it. Split your 30% between charity, church tithes, emergency fund savings, and other investment goals.
Many investors are ignorant when it comes to investing. There is nothing wrong with being ignorant. Ignorance simply means that you do not have enough education on a subject or field of study.
When starting something new, most people want to jump right in with both feet. Sadly, most people will not be successful by throwing money into something that they do not fully understand. It would be much wiser to realize that ALL investments have risk associated with them. The reality of losing some, or even all of your money, is a very real possibility. Any kind of investing, no matter what, will require you to have some basic skills.
It is prudent, long before you start investing, to gain as much information as possible on the subject of investing. It is my recommendation to focus on only one investment vehicle initially. Do you know how the stock market really works? Would you rather make money by investing in real estate? Picking just one area of expertise will allow you to master that specific subject through education and experience.
Additionally, you also need to lay out your investment goals. Do you know what you really want to achieve by investing in this specific area? For example, your goal may be to be able to provide for your child's college education. Before you start investing your money, it is a good idea to consider what goals you want to target with your investment. Set your goal to be a certain amount of money in 15 years time. With your goal clearly in your mind, you will be in a much better position to make intelligent decisions. As things progress, you can make better choices and adjust your risk tolerance.
Sadly, many people invest with the hopes of becoming rich overnight. This is not impossible, but it seldom happens, so don’t count on it. It is a bad idea to start investing with a goal of trying to get rich overnight. For one thing, your goal is much too vague and undefined. For another, your goal requires you to take way too much risk in order to achieve your goal.
A much safer approach is to plan to invest in a way that will enable your money to grow over time, slowly. If you have read my book, Start Winning With Money, you will remember that step one to investing is preservation of your hard earned capital. Trying to achieve wealth overnight does not allow you to preserve capital, as you will take on way too much risk in your investments.
Once you have achieved your targeted goal however, you will be able to use the return on your investment for your child’s education. Ideally, you will have invested a lot less money than the total amount of money received at the end of your investment term. The big idea behind investing is that your money compounds on itself without you having to physically do anything for that money.
Before making any investment, it is a good idea to consult with a financial planner. I recommend that you sit down with an advisor that charges by the hour, not an advisor that gets paid based on how much money you give them to manage. A good, fee-based financial planner should be able to advise you and help you with the financial goals you've got in mind. He or she should be able to give you an idea of the realistic returns your investment will return over the long term, and when you can expect to reach your overall financial goals.
Investing is much more complicated than just buying and selling something, whether that something be stocks, bonds, mutual funds, ETF's or real estate. In order to be successful, and achieve positive returns from your investments, you will need to do some basic research and have some general understanding about your chosen investment vehicles.
Using your credit cards wisely might be one of the most important decisions you can make towards overall financial health. The reasoning behind this is incredibly simple; high interest rates on credit cards can cost you a lot more than money if you can not make your payments on time, every time, without fail.
For most people, rent or mortgage payments, along with auto loans, are the two largest debts they carry in terms of actual dollars. These two payments often account for well over 30% of someone's take home pay each month. When credit cards and personal loans are added to this mix, the overall debt costs each month can quickly reach 60% or more of your take home pay. Having this much debt does not leave a lot of money for other living expenses such as food, clothing, utilities etc. For most consumers, the payments on their credit cards or personal loans are also the highest interest rate loans that they have.
There are many reasons why credit cards can specifically become the biggest threat to your overall financial health. The number one reason is that credit cards are so easy to use. The number of people who use credit cards for everyday purchases is incredibly high. Consumers tend to forget that if they do not pay off the entire balance each month, they will be charged interest. Most credit card companies will happily charge you as much as they legally can for the credit they are extending to you.
To make matters worse, if you are late on your payments, or if you do not make any payment at all, the credit card companies will ruin your credit score. 35% of your FICO score is based on credit repayment frequency and timeliness. It does not take very long for delinquent payments (or non-payment) to derail your credit score. Additionally, these negative marks on your credit report can stay there for up to seven years. These negative marks against your credit will to either deny you future credit, or cost you much higher interest rates on new accounts. To make this incredibly simple, late payments will simply cost you more money in the future.
The very best way to handle your credit cards is to pay off the balance each month. This not only makes your credit report look good, but it also keeps you from paying high interest rates. The second thing to do is to avoid using your credit cards for unnecessary expense. Instead of paying with your credit card, try using your debit card, or that green stuff called cash. This one incredibly simple action can save you more money than you ever imagined.
If you feel you are already in trouble with your credit cards, sit down with your statements and make a plan to begin paying them down. I suggest you look at my Budgeting 101 page for more help on getting out of your situation. Start by using the debt snowball, or paying off the credit cards that have the lowest balances. Once these are paid off, move to the next lowest balance and begin paying that card down by adding the same amount you were paying on the now "paid off" card as well as the regular payment you make currently. It will take patience and some financial sacrifice, but it can be done.