Many of us spend (ha ha...) countless hours trying to figure out how to maximize our personal lifetime wealth... Here are some ideas to ponder...
First of all, maximizing personal lifetime wealth will require that one maximize savings and minimize current consumption – because of the power of compounding, the more we set aside for investing early on in life, the greater the probability that these savings will grow into a substantial nest egg. In addition, it’s a matter of simple math – the more we will have available to invest, the greater our potential returns will be.
The second most important thing we must do is to invest these savings strategically. Such investments must be well-diversified in order to minimize losses, and the level of risk undertaken must be commensurate with our investor-type. This may of course impact the potential to maximize returns as a more conservative investment approach will, necessarily, reduce returns and vice versa.
Third, we must rebalance our investment portfolio, at the very least on an annual basis, in order to maintain a consistent investment strategy and an appropriate level of diversification.
Fourth, one should only invest in assets one understands, following substantial research that should invoke both fundamental and technical analysis techniques as well as a perusal of analysts’ opinions.
Investing according to the above guidelines should get you on your way towards maximizing your personal lifetime wealth.
Have other ideas? Share them. Comment.
Raging Academic
Showing posts with label saving. Show all posts
Showing posts with label saving. Show all posts
Wednesday, February 14, 2007
Monday, February 12, 2007
More Methods to Start Saving...
Here are some additional tricks to get your saving in gear -
Did you know that the U.S. savings rate has been negative for most of the past two years? (Commerce Department Bureau of Economic Analysis) Did you know that, on average, U.S. households now owe more than they earn in a single year? Isn't it about time you got more serious about saving?
+ Check Pennies - this is a great little method if you are one of those who still balance your checkbook...everytime you write a check, round the balance down to the nearest dollar; whenever you balance your checkbook, you'll find a small surplus in your checking account - transfer it immediately to some sort of savings account. If you have an interest-bearing checking account make sure to trim off those interest payments at the end of every month and transfer them to a savings or investment account as well.
+ 401k's - max out your contribution every year; there are a couple of potential benefits to this: tax-deferred savings and growth maximizes the advantage of compounding, and matching employer contributions are kind of like a bonus that you simply won't get if you don't use your 401k option.
+ Round Up Mortgage Payments - make sure to allocate the surplus to principal; two benefits: less interest payments over the lifetime of your loan, and earlier payoff (over the course of a 30 year mortgage this little trick could easily knock 2-3 months off your mortgage)
+ Sock Away Windfalls - make a point to save and/or invest any extra money that happens to fall into your lap e.g. a surprise inheritance, a bonus at work or a tax refund.
+ Budget - instead of saving whatever is left over, determine ahead of time what you intend to spend and immediately set aside the difference.
Do you know of any additional savings tips and tricks? Leave a comment!
ragingacademic
Did you know that the U.S. savings rate has been negative for most of the past two years? (Commerce Department Bureau of Economic Analysis) Did you know that, on average, U.S. households now owe more than they earn in a single year? Isn't it about time you got more serious about saving?
+ Check Pennies - this is a great little method if you are one of those who still balance your checkbook...everytime you write a check, round the balance down to the nearest dollar; whenever you balance your checkbook, you'll find a small surplus in your checking account - transfer it immediately to some sort of savings account. If you have an interest-bearing checking account make sure to trim off those interest payments at the end of every month and transfer them to a savings or investment account as well.
+ 401k's - max out your contribution every year; there are a couple of potential benefits to this: tax-deferred savings and growth maximizes the advantage of compounding, and matching employer contributions are kind of like a bonus that you simply won't get if you don't use your 401k option.
+ Round Up Mortgage Payments - make sure to allocate the surplus to principal; two benefits: less interest payments over the lifetime of your loan, and earlier payoff (over the course of a 30 year mortgage this little trick could easily knock 2-3 months off your mortgage)
+ Sock Away Windfalls - make a point to save and/or invest any extra money that happens to fall into your lap e.g. a surprise inheritance, a bonus at work or a tax refund.
+ Budget - instead of saving whatever is left over, determine ahead of time what you intend to spend and immediately set aside the difference.
Do you know of any additional savings tips and tricks? Leave a comment!
ragingacademic
Tuesday, January 16, 2007
Three Methods To Start Saving Now!!
If you are hoping to delve into the world of investments, you need to make sure you have some cash to work with. Wetting your toes on Wall Street does not require millions and millions - through so-called DRIP programs you can start with as little as the current price of the stock you are thinking of buying. The following are three favorite methods to start saving right now - these are methods which I have been sharing with students in my finance classes for several years; one of the following always seems to hit a chord...and over time it will help you build that nest egg you are dreaming of:
#1 - Easiest - Piggy Bank - Go out and buy a piggy bank, one that's not too small but not too big; the clear ones are great for this purpose because you get to WATCH your savings grow! Every evening, put all of your loose change into this piggy bank. Within a year you should have between $150 and $300 saved. It's not a lot, but this is money you'll never miss!! Make sure to set a goal for this money - you could deposit it in your savings account as an extra contribution, or you may want to buy something relatively large like a DVD player or a new component for your stereo system.
#2 - A Bit Harder - Breaking Bad Habits - We all have bad habits...some of us smoke, some of us drink too much, some of us chew too much gum and others eat too many snacks. Choose a habit - better to choose one you were trying to do away with anyway... (if you choose smoking...I highly recommend checking out www.smokeclinic.com ) Figure out what you spend on your habit daily. Quit your habit, and at the end of every week, put the money you would have spent on your nasty habit in a glass jar. At the end of every month, make a point to go to the bank and to deposit your extra money into your savings account. If you smoke a pack a day, for example, you'll be able to save an extra $1000 every year by quitting (not to speak of the health benefits and longevity which you will gain...!) This is money you can choose to use for an extra long weekend you would not have been able to afford otherwise - or just keep it growing to live a better retirement!
#3 - Requires More Financial Discipline - Extra Savings - Decide on a reasonable sum, preferably a round sum that comes in bill form i.e. $5, or $10 or $20. Get another glass jar, and at the end of every week - say, every Friday afternoon - put one bill in your jar. Again, at the end of every month make sure to make that trip to the bank and to deposit your bills into your savings account. If you know you just don't have that extra $5 or $20 bill, you WILL get along without it. And, at the end of the year, you'll have an extra $250, $500 or $1000 that you would not have had otherwise. Make sure to decide NOW what you want to do with the money at the end of the year. If you don't have adequate retirement savings or a rainy day fund - well, you'll know what to do!! :-)
Good luck!
ragingacademic
#1 - Easiest - Piggy Bank - Go out and buy a piggy bank, one that's not too small but not too big; the clear ones are great for this purpose because you get to WATCH your savings grow! Every evening, put all of your loose change into this piggy bank. Within a year you should have between $150 and $300 saved. It's not a lot, but this is money you'll never miss!! Make sure to set a goal for this money - you could deposit it in your savings account as an extra contribution, or you may want to buy something relatively large like a DVD player or a new component for your stereo system.
#2 - A Bit Harder - Breaking Bad Habits - We all have bad habits...some of us smoke, some of us drink too much, some of us chew too much gum and others eat too many snacks. Choose a habit - better to choose one you were trying to do away with anyway... (if you choose smoking...I highly recommend checking out www.smokeclinic.com ) Figure out what you spend on your habit daily. Quit your habit, and at the end of every week, put the money you would have spent on your nasty habit in a glass jar. At the end of every month, make a point to go to the bank and to deposit your extra money into your savings account. If you smoke a pack a day, for example, you'll be able to save an extra $1000 every year by quitting (not to speak of the health benefits and longevity which you will gain...!) This is money you can choose to use for an extra long weekend you would not have been able to afford otherwise - or just keep it growing to live a better retirement!
#3 - Requires More Financial Discipline - Extra Savings - Decide on a reasonable sum, preferably a round sum that comes in bill form i.e. $5, or $10 or $20. Get another glass jar, and at the end of every week - say, every Friday afternoon - put one bill in your jar. Again, at the end of every month make sure to make that trip to the bank and to deposit your bills into your savings account. If you know you just don't have that extra $5 or $20 bill, you WILL get along without it. And, at the end of the year, you'll have an extra $250, $500 or $1000 that you would not have had otherwise. Make sure to decide NOW what you want to do with the money at the end of the year. If you don't have adequate retirement savings or a rainy day fund - well, you'll know what to do!! :-)
Good luck!
ragingacademic
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