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Why You Should Invest

Investing has become increasingly important over the years, as the future of
social security benefits becomes unknown.

People want to insure their futures, and they know that if they are depending
on Social Security benefits, and in some cases retirement plans, that they may
be in for a rude awakening when they no longer have the ability to earn a
steady income. Investing is the answer to the unknowns of the future.

You may have been saving money in a low interest savings account over the
years. Now, you want to see that money grow at a faster pace. Perhaps you've
inherited money or realized some other type of windfall, and you need a way to
make that money grow. Again, investing is the answer.

Investing is also a way of attaining the things that you want, such as a new
home, a college education for your children, or expensive 'toys.' Of course,
your financial goals will determine what type of investing you do.

If you want or need to make a lot of money fast, you would be more interested
in higher risk investing, which will give you a larger return in a shorter
amount of time. If you are saving for something in the far off future, such as
retirement, you would want to make safer investments that grow over a longer
period of time.

The overall purpose in investing is to create wealth and security, over a
period of time. It is important to remember that you will not always be able to
earn an income: you will eventually want to retire.

You also cannot count on the social security system to do what you expect it to
do. As we have seen with Enron, you also cannot necessarily depend on your
company's retirement plan either. So, again, investing is the key to insuring
your own financial future, but you must make smart investments!

Investing Basics -- What Are Your Investment Goals

When it comes to investing, many first time investors want to jump right in with 
both feet. Unfortunately, very few of those investors are successful. Investing 
in anything requires some degree of skill. It is important to remember that few 
investments are a sure thing -- there is the risk of losing your money!

Before you jump right in, it is better to not only find out more about
investing and how it all works, but also to determine what your goals are. What
do you hope to achieve with your investments? Will you be funding a college
education? Buying a home? Retiring? Before you invest a single penny, really
think about what you hope to achieve with that investment. Knowing what your
goal is will help you make smarter investment decisions along the way!

Too often, people invest money with dreams of becoming rich overnight. This is
possible -- but it is also rare. It is usually a very bad idea to start
investing with hopes of becoming rich overnight. It is safer to invest your
money in such a way that it will grow slowly over time, and be used for
retirement or a child's education. However, if your investment goal is to get
rich quick, you should learn as much about high-yield, short term investing as
you possibly can before you invest.

You should strongly consider talking to a financial planner before making any
investments. Your financial planner can help you determine what type of
investing you must do to reach the financial goals that you have set. He or she
can give you realistic information as to what kind of returns you can expect and
how long it will take to reach your specific goals.

Again, remember that investing requires more than calling a broker and telling
them that you want to buy stocks or bonds. It takes a certain amount of
research and knowledge about the market if you hope to invest successfully.

Different Types of Investments

Overall, there are three different kinds of investments. These include stocks,
bonds, and cash. Sounds simple, right? Well, unfortunately, it gets very
complicated from there. You see, each type of investment has numerous types of
investments that fall under it.

There is quite a bit to learn about each different investment type. The stock
market can be a big scary place for those who know little or nothing about
investing. Fortunately, the amount of information that you need to learn has a
direct relation to the type of investor that you are. There are also three
types of investors: conservative, moderate, and aggressive. The different types
of investments also cater to the two levels of risk tolerance: high risk and low

Conservative investors often invest in cash. This means that they put their
money in interest bearing savings accounts, money market accounts, mutual
funds, US Treasury bills, and Certificates of Deposit. These are very safe
investments that grow over a long period of time. These are also low risk

Moderate investors often invest in cash and bonds, and may dabble in the stock
market. Moderate investing may be low or moderate risks. Moderate investors
often also invest in real estate, providing that it is low risk real estate.

Aggressive investors commonly do most of their investing in the stock market,
which is higher risk. They also tend to invest in business ventures as well as
higher risk real estate. For instance, if an aggressive investor puts his or
her money into an older apartment building, then invests more money renovating
the property, they are running a risk. They expect to be able to rent the
apartments out for more money than the apartments are currently worth -- or to
sell the entire property for a profit on their initial investments. In some
cases, this works out just fine, and in other cases, it doesn't. It's a risk.

Before you start investing, it is very important that you learn about the
different types of investments, and what those investments can do for you.
Understand the risks involved, and pay attention to past trends as well.
History does indeed repeat itself, and investors know this first hand!

Determine Your Risk Tolerance

Each individual has a risk tolerance that should not be ignored. Any good stock
broker or financial planner knows this, and they should make the effort to help
you determine what your risk tolerance is. Then, they should work with you to
find investments that do not exceed your risk tolerance.

Determining one's risk tolerance involves several different things. First, you
need to know how much money you have to invest, and what your investment and
financial goals are.

For instance, if you plan to retire in ten years, and you've not saved a single
penny towards that end, you need to have a high risk tolerance -- because you
will need to do some aggressive -- risky -- investing in order to reach your
financial goal.

On the other side of the coin, if you are in your early twenties and you want
to start investing for your retirement, your risk tolerance will be low. You
can afford to watch your money grow slowly over time.

Realize of course, that your need for a high risk tolerance or your need for a
low risk tolerance really has no bearing on how you feel about risk. Again,
there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement
of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low
tolerance for risk, you would want to sell out: if you have a high tolerance,
you would let your money ride and see what happens. This is not based on what
your financial goals are. This tolerance is based on how you feel about your

Again, a good financial planner or stock broker should help you determine the
level of risk that you are comfortable with, and help you choose your
investments accordingly.

Your risk tolerance should be based on what your financial goals are and how
you feel about the possibility of losing your money. It's all tied in together.

What Is Your Investment Style?

Knowing what your risk tolerance and investment style are will help you choose
investments more wisely. While there are many different types of investments
that one can make, there are really only three specific investment styles --
and those three styles tie in with your risk tolerance. The three investment
styles are conservative, moderate, and aggressive.

Naturally, if you find that you have a low tolerance for risk, your investment
style will most likely be conservative or moderate at best. If you have a high
tolerance for risk, you will most likely be a moderate or aggressive investor.
At the same time, your financial goals will also determine what style of
investing you use.

If you are saving for retirement in your early twenties, you should use a
conservative or moderate style of investing -- but if you are trying to get
together the funds to buy a home in the next year or two, you would want to use
an aggressive style.

Conservative investors want to maintain their initial investment. In other
words, if they invest $5000 they want to be sure that they will get their
initial $5000 back. This type of investor usually invests in common stocks and
bonds and short term money market accounts.

An interest earning savings account is very common for conservative investors.
A moderate investor usually invests much like a conservative investor, but will
use a portion of their investment funds for higher risk investments. Many
moderate investors invest 50% of their investment funds in safe or conservative
investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won't
take. They invest higher amounts of money in riskier ventures in the hopes of
achieving larger returns -- either over time or in a short amount of time.
Aggressive investors often have all or most of their investment funds tied up
in the stock market.

Again, determining what style of investing you will use will be determined by
your financial goals and your risk tolerance. No matter what type of investing
you do, however, you should carefully research that investment. Never invest
without having all of the facts!

How to Know When to Sell Your Stocks

While quite a bit of time and research goes into selecting stocks, it is often
hard to know when to pull out -- especially for first time investors. The good
news is that if you have chosen your stocks carefully, you won't need to pull
out for a very long time, such as when you are ready to retire. But there are
specific instances when you will need to sell your stocks before you have
reached your financial goals.

You may think that the time to sell is when the stock value is about to drop --
and you may even be advised by your broker to do this. But this isn't
necessarily the right course of action.

Stocks go up and down all the time, depending on the economy: and of course the
economy depends on the stock market as well. This is why it is so hard to
determine whether you should sell your stock or not. Stocks go down, but they
also tend to go back up.

You have to do more research, and you have to keep up with the stability of the
companies that you invest in. Changes in corporations have a profound impact on
the value of the stock. For instance, a new CEO can affect the value of stock.
A plummet in the industry can affect a stock. Many things -- all combined --
affect the value of stock. But there are really only three good reasons to sell
a stock.

The first reason is having reached your financial goals. Once you've reached
retirement, you may wish to sell your stocks and put your money in safer
financial vehicles, such as a savings account.

This is a common practice for those who have invested for the purpose of
financing their retirement. The second reason to sell a stock is if there are
major changes in the business you are investing in that cause, or will cause,
the value of the stock to drop, with little or no possibility of the value
rising again. Ideally, you would sell your stock in this situation before the
value starts to drop.

If the value of the stock spikes, this is the third reason you may want to
sell. If your stock is valued at $100 per share today, but drastically rises to
$200 per share next week, it is a great time to sell -- especially if the
outlook is that the value will drop back down to $100 per share soon. You would
sell when the stock was worth $200 per share.

As a beginner, you definitely want to consult with a broker or a financial
advisor before buying or selling stocks. They will work with you to help you
make the right decisions to reach your financial goals.

Investing Mistakes to Avoid

Along the way, you may make a few investing mistakes, however there are big
mistakes that you absolutely must avoid if you are to be a successful investor.
For instance, the biggest investing mistake that you could ever make is to not
invest at all, or to put off investing until later. Make your money work for
you -- even if all you can spare is $20 a week to invest!

While not investing at all or putting off investing until later are big
mistakes, investing before you are in the financial position to do so is
another big mistake. Get your current financial situation in order first, and
then start investing. Get your credit cleaned up, pay off high interest loans
and credit cards, and put at least three months of living expenses in savings.
Once this is done, you are ready to start letting your money work for you.

Don't invest to get rich quick. That is the riskiest type of investing that
there is, and you will more than likely lose. If it was easy, everyone would be
doing it! Instead, invest for the long term, and have the patience to weather
the storms and allow your money to grow. Only invest for the short term when
you know you will need the money in a short amount of time, and then stick with
safe investments, such as certificates of deposit.

Don't put all of your eggs into one basket. Scatter it around various types of
investments for the best returns. Also, don't move your money around too much.
Let it ride. Pick your investments carefully, invest your money, and allow it
to grow -- don't panic if the stock drops a few dollars. If the stock is a
stable stock, it will go back up.

A common mistake that a lot of people make is thinking that their investments
in collectibles will really pay off. Again, if this were true, everyone would
do it. Don't count on your Coke collection or your book collection to pay for
your retirement years! Count on investments made with cold hard cash instead.

Choosing a Broker

Depending on the type of investing that you plan to do, you may need to hire a
broker to handle your investments for you. Brokers work for brokerage houses
and have the ability to buy and sell stock on the stock exchange. You may
wonder if you really need a broker. The answer is yes. If you intend to buy or
sell stocks on the stock exchange, you must have a broker.

Stockbrokers are required to pass two different tests in order to obtain their
license. These tests are very difficult, and most brokers have a background in
business or finance, with a Bachelors or Masters Degree.

It is very important to understand the difference between a broker and a stock
market analyst. An analyst literally analyzes the stock market, and predicts
what it will or will not do, or how specific stocks will perform. A stock
broker is only there to follow your instructions to either buy or sell stock:
not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you
instruct your broker to buy or sell a stock, they earn a set percentage of the
transaction. Many brokers charge a flat 'per transaction' fee.

There are two types of brokers: Full service brokers and discount brokers. Full
service brokers can usually offer more types of investments, may provide you
with investment advice, and is usually paid in commissions.

Discount brokers typically do not offer any advice and do no research -- they
just do as you ask them to do, without all of the bells and whistles.

So, the biggest decision you must make when it come to brokers is whether you
want a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service broker to
ensure that you are making wise investments. They can offer you the skill that
you lack at this point. However, if you are already knowledgeable about the
stock market, all you really need is a discount broker to make your trades for

About Online Trading

The invention of the Internet has brought about many changes in the way that we
conduct our lives and our personal business. We can pay our bills online, shop
online, bank online, and even date online!

We can even buy and sell stocks online. Traders love having the ability to look
at their accounts whenever they want to, and brokers like having the ability to
take orders over the Internet, as opposed to the telephone.

Most brokers and brokerage houses now offer online trading to their clients.
Another great thing about trading online is that fees and commissions are often
lower. While online trading is great, there are some drawbacks.

If you are new to investing, having the ability to actually speak with a broker
can be quite beneficial. If you aren't stock market savvy, online trading may be
a dangerous thing for you. If this is the case, make sure that you learn as much
as you can about trading stocks before you start trading online.

You should also be aware that you don't have a computer with Internet access
attached to you. You won't always have the ability to get online to make a
trade. You need to be sure that you can call and speak with a broker if this is
the case, using the online broker. This is true whether you are an advanced
trader or a beginner.

It is also a good idea to go with an online brokerage company that has been
around for a while. You won't find one that has been in business for fifty
years of course, but you can find a company that has been in business that long
and now offers online trading.

Again, online trading is a beautiful thing -- but it isn't for everyone. Think
carefully before you decide to do your trading online, and make sure that you
really know what you are doing!

Different Types of Bonds

Investing in bonds is very safe, and the returns are usually very good. There
are four basic types of bonds available and they are sold through the
Government, through corporations, state and local governments, and foreign

The greatest thing about bonds is that you will get your initial investment
back. This makes bonds the perfect investment vehicle for those who are new to
investing, or for those who have a low risk tolerance.

The United States Government sells Treasury Bonds through the Treasury
Department. You can purchase Treasury Bonds with maturity dates ranging from
three months to thirty years.

Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and
Treasury Bonds. All Treasury bonds are backed by the United States Government,
and tax is only charged on the interest that the bonds earn.

Corporate bonds are sold through public securities markets. A corporate bond is
essentially a company selling its debt. Corporate bonds usually have high
interest rates, but they are a bit risky. If the company goes belly-up, the
bond is worthless.

State and local Governments also sell bonds. Unlike bonds issued by the federal
government, these bonds usually have higher interest rates. This is because
State and Local Governments can indeed go bankrupt -- unlike the federal

State and Local Government bonds are free from income taxes -- even on the
interest. State and local taxes may also be waived. Tax-free Municipal Bonds
are common State and Local Government Bonds.

Purchasing foreign bonds is actually very difficult, and is often done as part
of a mutual fund. It is often very risky to invest in foreign countries. The
safest type of bond to buy is one that is issued by the US Government.

The interest may be a bit lower, but again, there is little or no risk
involved. For best results, when a bond reaches maturity, reinvest it into
another bond.

Determining Where You Will Invest

There are several different types of investments, and there are many factors in
determining where you should invest your funds.

Of course, determining where you will invest begins with researching the
various available types of investments, determining your risk tolerance, and
determining your investment style -- along with your financial goals.

If you were going to purchase a new car, you would do quite a bit of research
before making a final decision and a purchase. You would never consider
purchasing a car that you had not fully looked over and taken for a test drive.
Investing works much the same way.

You will of course learn as much about the investment as possible, and you
would want to see how past investors have done as well. It's common sense!

Learning about the stock market and investments takes a lot of time: but it is
time well spent. There are numerous books and websites on the topic, and you
can even take college level courses on the topic -- which is what stock brokers
do. With access to the Internet, you can actually play the stock market -- with
fake money -- to get a feel for how it works.

You can make pretend investments, and see how they do. Do a search with any
search engine for 'Stock Market Games' or 'Stock Market Simulations.' This is a
great way to start learning about investing in the stock market.

Other types of investments -- outside of the stock market -- do not have
simulators. You must learn about those types of investments the hard way -- by

As a potential investor, you should read anything you can get your hands on
about investing: but start with the beginning investment books and websites
first. Otherwise, you will quickly find that you are lost.

Finally, speak with a financial planner. Tell them your goals, and ask them for
their suggestions -- this is what they do! A good financial planner can easily
help you determine where to invest your funds, and help you set up a plan to
reach all of your financial goals. Many will even teach you about investing
along the way -- make sure you pay attention to what they are telling you!

How Much Money Should You Invest?

Many first time investors think that they should invest all of their savings.
This isn't necessarily true. To determine how much money you should invest, you
must first determine how much you actually can afford to invest, and what your
financial goals are.

First, let's take a look at how much money you can currently afford to invest.
Do you have savings that you can use? If so, great! However, you don't want to
cut yourself short when you tie your money up in an investment. What were your
savings originally for?

It is important to keep three to six months of living expenses in a readily
accessible savings account -- don't invest that money! Don't invest any money
that you may need to lay your hands on in a hurry in the future.

So, begin by determining how much of your savings should remain in your savings
account, and how much can be used for investments. Unless you have funds from
another source, such as an inheritance that you've recently received, this will
probably be all that you currently have to invest.

Next, determine how much you can add to your investments in the future. If you
are employed, you will continue to receive an income, and you can plan to use a
portion of that income to build your investment portfolio over time. Speak with
a qualified financial planner to set up a budget and determine how much of your
future income you will be able to invest.

With the help of a financial planner, you can be sure that you are not
investing more than you should -- or less than you should in order to reach
your investment goals.

For many types of investments, a certain initial investment amount will be
required. Hopefully, you've done your research, and you have found an
investment that will prove to be sound. If this is the case, you probably
already know what the required initial investment is.

If the money that you have available for investments does not meet the required
initial investment, you may have to look at other investments. Never borrow
money to invest, and never use money that you have not set aside for investing!

The Importance of Diversification

"Don't put all of your eggs in one basket!" You've probably heard that over and
over again throughout your life: and when it comes to investing, it is very
true. Diversification is the key to successful investing. All successful
investors build portfolios that are widely diversified, and you should too!

Diversifying your investments might include purchasing various stocks in many
different industries. It may include purchasing bonds, investing in money
market accounts, or even in some real property. The key is to invest in several
different areas -- not just one.

Over time, research has shown that investors who have diversified portfolios
usually see more consistent and stable returns on their investments than those
who just invest in one thing. By investing in several different markets, you
will actually be at less risk also.

For instance, if you have invested all of your money in one stock, and that
stock takes a significant plunge, you will most likely find that you have lost
all of your money. On the other hand, if you have invested in ten different
stocks, and nine are doing well while one plunges, you are still in reasonably
good shape.

A good diversification will usually include stocks, bonds, real property, and
cash. It may take time to diversify your portfolio. Depending on how much you
have to initially invest, you may have to start with one type of investment,
and invest in other areas as time goes by.

This is okay, but if you can divide your initial investment funds among various
types of investments, you will find that you have a lower risk of losing your
money, and over time, you will see better returns.

Experts also suggest that you spread your investment money evenly among your
investments. In other words, if you start with $100,000 to invest, invest
$25,000 in stocks, $25,000 in real property, $25,000 in bonds, and put $25,000
in an interest bearing savings account.

Investing for Retirement

Retirement may be a long way off for you -- or it might be right around the
corner. No matter how near or far it is, you've absolutely got to start saving
for it now. However, saving for retirement isn't what it used to be with the
increase in cost of living and the instability of social security. You have to
invest for your retirement, as opposed to saving for it!

Let's start by taking a look at the retirement plan offered by your company.
Once upon a time, these plans were quite sound. However, after the Enron upset
and all that followed, people aren't as secure in their company retirement
plans anymore. If you choose not to invest in your company's retirement plan,
you do have other options.

First, you can invest in stocks, bonds, mutual funds, certificates of deposit,
and money market accounts. You do not have to state to anybody that the returns
on these investments are to be used for retirement. Just simply let your money
grow overtime, and when certain investments reach their maturity, reinvest them
and continue to let your money grow.

You can also open an Individual Retirement Account (IRA). IRA's are quite
popular because the money is not taxed until you withdraw the funds. You may
also be able to deduct your IRA contributions from the taxes that you owe. An
IRA can be opened at most banks. A ROTH IRA is a newer type of retirement
account. With a Roth, you pay taxes on the money that you are investing in your
account, but when you cash out, no federal taxes are owed. Roth IRA's can also
be opened at a financial institution.

Another popular type of retirement account is the 401(k). 401(k's) are
typically offered through employers, but you may be able to open a 401(k) on
your own. You should speak with a financial planner or accountant to help you
with this. The Keogh plan is another type of IRA that is suitable for self
employed people. Self-employed small business owners may also be interested in
Simplified Employee Pension Plans (SEP). This is another type of Keogh plan
that people typically find easier to administer than a regular Keogh plan.

Whichever retirement investment you choose, just make sure you choose one!
Again, do not depend on social security, company retirement plans, or even an
inheritance that may or may not come through! Take care of your financial
future by investing in it today.

Investment Strategy

Because investing is not a sure thing in most cases, it is much like a game --
you don't know the outcome until the game has been played and a winner has been
declared. Anytime you play almost any type of game, you have a strategy.
Investing isn't any different -- you need an investment strategy.

An investment strategy is basically a plan for investing your money in various
types of investments that will help you meet your financial goals in a specific
amount of time. Each type of investment contains individual investments that you
must choose from. A clothing store sells clothes -- but those clothes consist of
shirts, pants, dresses, skirts, undergarments, etc. The stock market is a type
of investment, but it contains different types of stocks, which all contain
different companies that you can invest in.

If you haven't done your research, it can quickly become very confusing --
simply because there are so many different types of investments and individual
investments to choose from. This is where your strategy, combined with your
risk tolerance and investment style all come into play.

If you are new to investments, work closely with a financial planner before
making any investments. They will help you develop an investment strategy that
will not only fall within the bounds of your risk tolerance and your investment
style, but will also help you achieve your financial goals.

Never invest money without having a goal and a strategy for reaching that goal!
This is essential. Nobody hands their money over to anyone without knowing what
that money is being used for and when they will get it back! If you don't have
a goal, a plan, or a strategy, that is essentially what you are doing! Always
start with a goal and a strategy for reaching that goal!

Getting Your Feet Wet -- Begin Investing

If you are anxious to get your investments started, you can get started right
away without having a lot of knowledge about the stock market. Start by being a
conservative investor with a low risk tolerance. This will give you a way to
making your money grow while you learn more about investing.

Start with an interest bearing savings account. You may already have one. If
you don't, you should. A savings account can be opened at the same bank that
you do your checking at -- or at any other bank. A savings account should pay 2
-- 4% on the money that you have in the account.

It's not a lot of money -- unless you have a million dollars in that account --
but it is a start, and it is money making money.

Next, invest in money market funds. This can often be done through your bank.
These funds have higher interest payouts than typical savings accounts, but
they work much the same way. These are short term investments, so your money
won't be tied up for a long period of time -- but again, it is money making

Certificates of Deposit are also sound investments with no risk. The interest
rates on CD's are typically higher than those of savings accounts or Money
Market Funds.

You can select the duration of your investment, and interest is paid regularly
until the CD reaches maturity. CD's can be purchased at your bank, and your
bank will insure them against loss. When the CD reaches maturity, you receive
your original investment, plus the interest that the CD has earned.

If you are just starting out, one or all of these three types of investments is
the best starting point. Again, this will allow your money to start making money
for you while you learn more about investing in other places.

Different Types of Stock

The different types of stock are what confuse most first time investors. That
confusion causes people to turn away from the stock market altogether, or to
make unwise investments. If you are going to play the stock market, you must
know what types of stock are available and what it all means!

Common Stock is a term that you will hear quite often. Anyone can purchase
common stock, regardless of age, income, age, or financial standing. Common
stock is essentially part ownership in the business you are investing in. As
the company grows and earns money, the value of your stock rises. On the other
hand, if the company does poorly or goes bankrupt, the value of your stock
falls. Common stock holders do not participate in the day to day operations of
a business, but they do have the power to elect the board of directors.

Along with common stock, there are also different classes of stock. The
different classes of stock in one company are often called Class A and Class B.
The first class, class A, essentially gives the stock owner more votes per share
of stock than the owners of class B stock. The ability to create different
classes of stock in a corporation has existed since 1987. Many investors avoid
stock that has more than one class, and stocks that have more than one class
are not called common stock.

The most upscale type of stock is of course Preferred Stock. Preferred stock
isn't exactly a stock. It is a mix of a stock and a bond. The owner's of
preferred stock can lay claim to the assets of the company in the case of
bankruptcy, and preferred stock holders get the proceeds of the profits from a
company before the common stock owners. If you think that you may prefer this
preferred stock, be aware that the company typically has the right to buy the
stock back from the stock owner and stop paying dividends.

Understanding Bonds

There are certain things you must understand about bonds before you start
investing in them. Not understanding these things may cause you to purchase the
wrong bonds, at the wrong maturity date.

The three most important things that must be considered when purchasing a bond
include the par value, the maturity date, and the coupon rate.

The par value of a bond refers to the amount of money you will receive when the
bond reaches its maturity date. In other words, you will receive your initial
investment back when the bond reaches maturity.

The maturity date is of course the date that the bond will reach its full
value. On this date, you will receive your initial investment, plus the
interest that your money has earned.

Corporate and State and Local Government bonds can be 'called' before they
reach their maturity, at which time the corporation or issuing Government will
return your initial investment, along with the interest that it has earned thus
far. Federal bonds cannot be 'called.'

The coupon rate is the interest that you will receive when the bond reaches
maturity. This number is written as a percentage, and you must use other
information to find out what the interest will be. A bond that has a par value
of $2000, with a coupon rate of 5% would earn $100 per year until it reaches

Because bonds are not issued by banks, many people don't understand how to go
about buying one. There are two ways this can be done.

You can use a broker or brokerage firm to make the purchase for you or you can
go directly to the Government. If you use a brokerage, you will more than
likely be charged a commission fee. If you want to use a broker, shop around
for the lowest commissions!

Purchasing directly through the Government isn't nearly as hard as it once was.
There is a program called Treasury Direct which will allow you to purchase bonds
and all of your bonds will be held in one account, that you will have easy
access to. This will allow you to avoid using a broker
or brokerage firm.

Why Should I Make a Budget?

You say you know where your money goes and you don't need it all written down
to keep up with it? I issue you this challenge. Keep track of every penny you
spend for one month and I do mean every penny.

You will be shocked at what the itty-bitty expenses add up to. Take the total
you spent on just one unnecessary item for the month, multiply it by 12 for
months in a year and multiply the result by 5 to represent 5 years.

That is how much you could have saved AND drawn interest on in just five years.
That, my friend, is the very reason all of us need a budget.

If we can get control of the small expenses that really don't matter to the
overall scheme of our lives, we can enjoy financial success.

The little things really do count. Cutting what you spend on lunch from five
dollars a day to three dollars a day on every work day in a five day work week
saves $10 a week: $40 a month: $480 a year: $2400 in five years: .plus interest.

See what I mean: it really IS the little things and you still eat lunch
everyday AND that was only one place to save money in your daily living without
doing without one thing you really need. There are a lot of places to cut
expenses if you look for them.

Set some specific long term and short term goals. There are no wrong answers
here. If it's important to you, then it's important period.

If you want to be able to make a down payment on a house, start a college fund
for your kids, buy a sports car, take a vacation to Aruba: anything: then that
is your goal and your reason to get a handle on your financial situation now.

The Budget -- The Ultimate Financial Management Tool

A carpenter uses a set of house plans to build a house. If he didn't the
bathroom might get overlooked altogether.

Rocket Scientists would never begin construction on a new booster rocket
without a detailed set of design specifications. Yet most of us go blindly out
into the world without an inkling of an idea about finances and without any
plan at all.

Not very smart of us, is it?

A money plan is called a budget and it is crucial to get us to our desired
financial goals.

Without a plan we will drift without direction and end up marooned on a distant
financial reef.

If you have a spouse or a significant other, you should make this budget
together. Sit down and figure out what your joint financial goals are: long
term and short term.

Then plan your route to get to those goals. Every journey begins with one step
and the first step to attaining your goals is to make a realistic budget that
both of you can live with.

A budget should never be a financial starvation diet. That won't work for the
long haul. Make reasonable allocations for food, clothing, shelter, utilities
and insurance and set aside a reasonable amount for entertainment and the
occasional luxury item. Savings should always come first before any spending.

Even a small amount saved will help you reach your long term and short term
financial goals. You can find many budget forms on the internet. Just use any
search engine you choose and type in "free budget forms".

You'll get lots of hits. Print one out and work on it with your spouse or
significant other. Both of you will need to be happy with the final result and
feel like it's something you can stick to.

Spend Wisely to Save Money

Have you ever noticed that the things you buy every week at the grocery and
hardware stores go up a few cents between shopping trips? Not by much: just by
a little each week but they continue to creep up and up.

All it takes for the price to jump up by a lot is a little hiccup in the world
wide market, note the price of gasoline as it relates to world affairs.

There is a way that we can keep these price increases from impacting our
personal finances so much and that is by buying in quantity and finding the
best possible prices for the things we use and will continue to use everyday:
things that will keep just as well on the shelves in our homes as it does on
the shelves at the grocery store or hardware store.

For instance, dog food and cat food costs about 10% less when bought by the
case than it does when bought at the single can price and if you wait for close
out prices you save a lot more than that.

Set aside some space in your home and make a list of things that you use
regularly which will not spoil. Any grain or grain products will need to be
stored in airtight containers that rats can't get into so keep that in mind.

Then set out to find the best prices you can get on quantity purchases of such
things as bathroom items and dry and canned food.

You will be surprised at how much you can save by buying a twenty pound bag of
rice as opposed to a one pound bag but don't forget that it must be kept in a
rat proof container.

You can buy some clothing items such as men's socks and underwear because those
styles don't change, avoid buying children's and women's clothing, those styles
change and sizes change too drastically.

Try to acquire and keep a two year supply of these items and you can save
hundreds of dollars.

Rebates -- Reward or Rip Off?

Rebates have become increasingly popular in the last few years on a lot of
items and certainly on electronic items and computers. Rebates of $20, $50 or
$100 are not uncommon.

I've even seen items advertised as "free after rebate". Do these rebates come
under the heading of "too good to be true"? Some of them do and there are
"catches" to watch out for but if you are careful, rebates can help you get
some really good deals.

The way a rebate works is that you pay the listed price for an item then mail
in a form and the bar code to the manufacturer and they send you a refund thus
reducing the price of what you paid for the item except with a time delay of
several weeks.

Rule #1. Rebates from reputable companies are usually just fine.

You can be pretty sure you will get the promised rebate from Best Buy, Amazon
or Dell but you should probably not count on getting one from a company you've
never heard of. If you really want the product and are OK with paying the price
listed then buy it but don't count on actually getting the refund.

Rule #2. Check rebate expiration dates.

Many times products will stay on the shelf of a retailer after the date for
sending in the rebate offer has expired so check that date carefully.

Rule #3. Be sure you have all the forms required to file for the rebate before
you leave the store.

Rebates will almost always require a form to be filled out, a receipt for the
purchase and a bar code.

Rule #4. Back up your rebate claim.

Make copies of everything you send in to get your rebate including the bar
code. Stuff gets lost in the mail all the time and if the rebate is for $50
it's worth the trouble to back up your claim.

Avoiding Impulse Spending

Answer these questions truthfully:

1.)  Does your spouse or partner complain that you spend too much money?

2.)  Are you surprised each month when your credit card bill arrives at how
much more you charged than you thought you had?

3.)  Do you have more shoes and clothes in your closet than you could ever
possibly wear?

4.)  Do you own every new gadget before it has time to collect dust on a
retailer's shelf?

5.)  Do you buy things you didn't know you wanted until you saw them on display
in a store?

If you answered "yes" to any two of the above questions, you are an impulse
spender and indulge yourself in retail therapy.

This is not a good thing. It will prevent you from saving for the important
things like a house, a new car, a vacation or retirement. You must set some
financial goals and resist spending money on items that really don't matter in
the long run.

Impulse spending will not only put a strain on your finances but your
relationships, as well. To overcome the problem, the first thing to do is learn
to separate your needs from your wants.

Advertisers blitz us hawking their products at us 24/7. The trick is to give
yourself a cooling-off period before you buy anything that you have not planned

When you go shopping, make a list and take only enough cash to pay for what you
have planned to buy. Leave your credit cards at home.

If you see something you think you really need, give yourself two weeks to
decide if it is really something you need or something you can easily do
without. By following this simple solution, you will mend your financial fences
and your relationships.

Stabilize Your Current Situation Before You Invest

Before you consider investing in any type of market, you should really take a
long hard look at your current situation. Investing in the future is a good
thing, but clearing up bad -- or potentially bad -- situations in the present
is more important.

Pull your credit report. You should do this once each year. It is important to
know what is on your report, and to clear up any negative items on your credit
report as soon as possible. If you've set aside $25,000 to invest, but you have
$25,000 worth of bad credit, you are better off cleaning up the credit first!

Next, look at what you are paying out each month, and get rid of expenses that
are not necessary. For instance, high interest credit cards are not necessary.
Pay them off and get rid of them. If you have high interest outstanding loans,
pay them off as well.

If nothing else, exchange the high interest credit card for one with lower
interest and refinance high interest loans with loans that are lower interest.
You may have to use some of your investment funds to take care of these
matters, but in the long run, you will see that this is the wisest course of

Get yourself into good financial shape -- and then enhance your financial
situation with sound investments.

It doesn't make sense to start investing funds if your bank balance is always
running low or if you are struggling to pay your monthly bills. Your investment
dollars will be better spent to rectify adverse financial issues that affect you
each day.

While you are in the process of clearing up your present financial situation,
make it a point to educate yourself about the various types of investments.

This way, when you are in a financially sound situation, you will be armed with
the knowledge that you need to make equally sound investments in your future.

Long Term Investments for the Future

If you are ready to invest money for a future event, such as retirement or a
child's college education, you have several options. You do not have to invest
in risky stocks or ventures. You can easily invest your money in ways that are
very safe, which will show a decent return over a long period of time.

First consider bonds. There are various types of bonds that you can purchase.
Bond's are similar to Certificates of Deposit. Instead of being issued by
banks, however, bonds are issued by the Government. Depending on the type of
bonds that you buy, your initial investment may double over a specific period
of time.

Mutual funds are also relatively safe. Mutual funds exist when a group of
investors put their money together to buy stocks, bonds, or other investments.
A fund manager typically decides how the money will be invested. All you need
to do is find a reputable, qualified broker who handles mutual funds, and he or
she will invest your money, along with other client's money. Mutual funds are a
bit riskier than bonds.

Stocks are another vehicle for long term investments. Shares of stocks are
essentially shares of ownership in the company you are investing in. When the
company does well financially, the value of your stock rises. However, if a
company is doing poorly, your stock value drops. Stocks, of course, are even
riskier than Mutual funds. Even though there is a greater amount of risk, you
can still purchase stock in sound companies, such as G & E Electric, and sleep
at night knowing that your money is relatively safe.

The important thing is to do your research before investing your money for long
term gain. When purchasing stocks you should choose stocks that are well
established. When you look for a mutual fund to invest in, choose a broker that
is well established and has a proven track record. If you aren't quite ready to
take the risks involved with mutual funds or stocks, at the very least invest
in bonds that are guaranteed by the Government.

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