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What The Buck?

1 October 2011 1,799 views No Comment

Does this cartoon remind you of the mindlessly futile behavior of a dog chasing his own tail? Are you wasting your valuable time and energy trying to make financial gains by chasing after funds and assets that you already have in your possession or within your reach but fail to recognize their proximity?

I totally understand what it’s like to be financially strapped and looking for any solution to obtaining financial security; but, the urgency to establish financial security can lead to exhaustive efforts that are non-productive, possibly destructive, and quite probably leave you spinning your wheels or reinventing the wheel.

Gather your current financial information: your income, your expenses, your savings, and cash (including what’s in the cookie jar). Separate your expenses into groups. In one group, list the fixed costs that cannot be altered (for example:  mortgage, rent, insurance). In another group, list the necessary costs that can be altered (food, utility usage, expensive name brands exchanged for quality generic or private label items that give you good value for your dollar but at a lower price).

In another group, list costs that might be renegotiated (mortgage, insurance, phone, cable). Last, but most-definitely not least, list the discretionary costs that can be eliminated, or at least reduced in frequency and/or price (dining out, theater tickets, electronics, muffins ‘n lattés, etc.). Discretionary expenses are the toughest to recognize, or more honestly stated, the toughest to manage with restraint, pragmatism, and prudence. You know who you are out there, stop denying, dodging, ignoring the inevitable.

Set a portion of your income aside for growth, at least 10%, preferably 25%. Start now making adjustments to your spending habits that will reduce some of your financial burden and will allow you to set aside money for growth via investing. Determine what portion of the savings you have, and will create, that you can afford to risk or lose and invest it in some stocks of historically, fundamentally-sound companies that pay a secure dividend. The objective is to put your money to work, grow it, and use sound means to preserve your initial investment dollars, the underlying principal, while reinvesting dividends and capital gains.

If you are a beginner, you need to get busy learning about investing: in stocks, bonds, and the overall markets. If you do not have the time to daily track your investments, I suggest you find the time. You are the only person who knows your limits, your tolerances, and are the one who has the most to lose if things get difficult. I also suggest keeping a portfolio of no more than five stocks in the beginning and limited to targeted areas with which you have a hands-on familiarity from your job, the products your use, and other means of exposure that give you a real sense of what you are buying and WHY!!!

Ever since I first started investing in stocks, out of necessity many years ago, I have used an online brokerage and have done all the research myself. My belief is that no one knows me better than I do; and I seek information, not biased advice. When I started investing in the markets, there were no online discount brokerages available to me; thus, the transaction costs were very high and trades could only be executed by a broker.

Today, there are a number of reliable websites Worth Checking that can educate you with the information and tools you need to learn BEFORE you buy your first share of stock. I even suggest that you watch CNBC and use their website, CNBC.com, to become more familiar with the dynamics of the global stock and bond markets, how they interact, how and why they move.

Remember, it is your money to grow, or to lose; so, be responsible, diligent, persistent, attentive, and flexible. Be mindful of the sources you use to get information or help and whether that source can profit from your positions and decisions; if so, by the very nature of business, their own gains will most likely take precedence.

 

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