Make Your Money Work

Part Two: Put Your Money to Work

Your Money Should Work Harder Than You Do

The main point is that you want your money working for you. If done properly – that is by maximizing the use of tax shelters, like IRA’s and Health Savings and 401K plans, you can reach a point where you money will earn more than you do each month.

First of all take full advantage of your employer's matching contributions to your 401K plan. Consider a stock fund for this money.

Then fund you and your spouse's IRA's to the maximum. Again use no-load, low cost mutual funds.

Use a Health Savings Plan and shop carefully for medical care so that you contributions can remain in the fund and grow tax free.

Don't be afraid of the stock market. If you don't want to bother with learning about individual stocks buy either a no-load, low cost S&P 500 or Wilshire 5000 mutual fund or you can trade in the so-called Exchange Traded Funds (ETF's) like Spiders or Diamonds, which mimic individual stock indexes, like the Nasdaq, the Dow or the S&P 500.

Diversify with cash and bonds, but be more aggressive when you are younger, for example putting money into technology stocks or mutual funds and get more conservative as you get older, moving more into bonds and cash - but never abandon the stock market entirely.

If you don't feel comfortable making these decisions yourself, there are many advisory services and newsletters, financial magazines and books that can guide you along. You can also hire professionals like a fee-only Certified Financial Planner or CPA with the Personal Financial Services designation to help you along.

If you want to retire at 50, buy a second house, cruise around the world whenever you feel like or leave a million dollars to your favorite charity, when you start your working career, you should consider every expense that does not grow your wealth – such as a house would – to be made at the expense of your fortune.

About 20 years ago, the government starting considering the amount of money they allowed you to keep through deductions as a “tax expenditure.” If the government didn’t get its hands on your money, they considered themselves cheated out of it.

Take the same approach to your investments and your future. Consider every dollar spent on non-essentials as a “savings expenditure”.

It is of course impossible to expect you to save every cent you earn – you do have to provide for food, shelter, utilities, health care and more – but you should think about where your money goes.

Create a plan – you can call it a budget if you want – that provides that you will save so much each month and stick to it. Just about everybody can free up a few dollars a day to add to their investments.

If you can’t seem to make ends meet, let alone save, you have to make some hard choices. Earn more, sell assets, cut out all non-essential expenses, and maybe even take a second job.

Unless you have some rich relatives who will leave you something in their will, no one will do this for you. And government programs, like Social Security will be hardly able to do a minimal job when your turn rolls around.

You don’t want to be relegated to a life of welfare payments or social security. But there will be no “do-overs”. The choices you make now will haunt or reward you for the rest of your life.

Growing wealthy will not happen all by itself. Start investing now and you will be very happy later.Growing wealthy will not happen all by itself. Start now and you will be very happy later. Use the gifts of time and compound growth to their fullest and you will wind up being able to enjoy your life to its fullest.

Part One: Types of Income

This article does not purport to offer investing advice. Consult a qualified financial professional before committing your money to any investment.

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