Learn How to Invest

So you have your money and are ready to invest.

You’ve determined how much you will put aside, when you will need your money, take care of your debt, and determined your goals. Now it’s time for you to find out what investment is for you and your goals. Even if you can only save $50 or $100 a month it is really worth it.  People have a hard time setting aside $5 here or $2 there, but in all reality, is that IT ALL ADDS UP!

We have lost the respect for the dollar. We do not understand the value of the dollar and how the accumulation process of wealth starts. Someone younger saw me stop in the middle of a parking lot to pick up a penny and that I was so excited, they said “you know it’s not even worth your time to pick up a penny”? I said tell me you’re kidding! This dumb shit began to tell me how my energy was not even worth the time to bend down and pick up the penny. I told him, “see you’re the problem, you don’t understand the value of a dollar!”  People do not understand that the dollar is made up of 100 pennies, but they don’t actually see the link between the penny and the dollar. Therefore, mentally they don’t value the penny. This out of sight out of mind mentality is the issue.  But I’ll cover more of this topic later on…. Now back to how all your pennies add up.

Your Steps to Success

Compound Interest

By starting to save now, you’re giving your money — however little it is — time to earn compound interest which means that you can contribute less money for fewer years if you start when you’re young and still end up with more cash than someone who waits.

For example, if you start saving or investing when you’re 25 and save $100 a month for ten years then let the money sit, your stash will grow to $174,928 by the time you turn 65 (assuming an 8% annual return). If you wait until age 35 to start saving and sock away the same $100 a month for the next 30 years, you’ll have only $135,940 by 65. You will have contributed three times as much starting later, but will end up with nearly $39,000 less.  So you see here, just because you’re saving doesn’t actually mean you’re getting the max efficiency out of your “PENNY”. You need to be knowledgeable in helping yourself learn to make your money work for you.

Savings Accounts

If you save your money in a savings account, the bank or credit union will pay you interest, and you can easily get your money whenever you want it. At most banks, your savings account will be insured by the Federal Deposit Insurance Corporation (FDIC). You can get about 2.5% a year ($2.50 for every $100) for the money you have in your account. 

Insured Bank Money Market Accounts

These accounts tend to offer higher interest rates than savings accounts and often give you check-writing privileges. Like a savings account, many money market accounts will be insured by the FDIC. Note that bank money market accounts are not the same as money market mutual funds, which are not insured by the FDIC.

Are you Ready to Get Started?

Certificates of Deposit

You can earn an even higher interest if you put your money in a certificate of deposit, or CD, which is also protected by the FDIC. When you buy a CD, you promise that you’re going to keep your money in the bank for a certain amount of time and earn 1 to 4 percent compounded interest. CD’s fluctuate all the time, but for the most part you will get a higher rate of return on a CD vs a savings account. CD’s are a guaranteed safe investment. 


Many companies borrow money so they can become even bigger and more successful. One way they borrow money is by selling bonds. When you buy a bond, you’re lending your money to the company so it can grow. The company promises to pay you interest and to return your money on a date in the future. The company’s “promise to repay” your principal generally makes bonds less risky than stocks. But bonds can be risky. To assess how risky a bond is you can check the bond’s credit rating. Unlike stockholders, bond holders know how much money they will make, unless the company goes out of business. If the company goes out of business or declares bankruptcy, bondholders may lose their money. But if there is any money left in the company, they will get their investment before the stockholders. Bonds generally provide higher returns (with higher risk) than savings accounts, but lower returns (with lower risk) than stocks.

Treasury Notes

Treasury Notes are securities that have a stated interest rate that is paid semi-annually until maturity. What makes notes and bonds different are the terms to maturity. Notes are issued in two-, three-, five- and 10-year terms. Conversely, bonds are long-term investments with terms of more than 10 years. 

Treasury bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. Bills are typically sold at a discount from the par amount (also called face value). For instance, you might pay $990 for a $1,000 bill. When the bill matures, you would be paid $1,000. The difference between the purchase price and face value is interest. they are one of the few money market instruments that are affordable to the individual investors. T-bills are usually issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000 and $1 million to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).

The interest is the difference between the purchase price and the price paid either at maturity (face value) or the price of the bill if sold prior to maturity. For example, let’s say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its nearly bulletproof credit rating) writes you an IOU for $10,000 that it agrees to pay back in three months. The appreciation – and, therefore, the value to you – comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period. 

The biggest reasons that T-Bills are so popular is that other positives are that T-bills (and all Treasuries) are considered to be the safest investments in the world because the U.S. government backs them. In fact, they are considered risk-free. Furthermore, they are exempt from state and local taxes.


When you buy stock in a company-you become one of the owners.

  • What Are Stocks

    Your share of the company depends on how many shares of the company's stock you own. Over the past 60 years, the investment that has provided the highest average rate of return has been stocks. But there are no guarantees of profits when you buy stock, which makes stock one of the most risky investments. If the company doesn't do well or falls out of favor with investors, your stock can fall in price, and you could lose your money. You can make money in two ways from stock. First, the price of the stock can rise if the company does well and other investors want to buy the company's stock. If a stock rises from $10 to $12, the $2 increase is called a capital gain or appreciation. Second, a company sometimes pays out a part of its profits to stock holders-that's called a dividend. Sometimes a company will decide not to pay out dividends, choosing instead to keep its profits and use them to expand the business, build new factories, design better products, or hire more workers.

  • Advantages to Stocks that Pay a Dividend

    Dividend-paying stocks provide a more certain income than what price appreciation alone offers. When the stock market declines, holders of dividend-paying stocks still receive an income, and the dividend helps to maintain the stock price even in a down market. And, often, the dividend plus the capital gains of a dividend-paying stock is greater than the capital gains of many stocks that do not pay a dividend. In fact, dividends have accounted for about 40% of the total return of the stock market since 1928!

    Dividend earnings are not only taxed immediately, they're also taxed twice. For example, suppose a company has a strong sales year and announces that it will pay a dividend of $1 per share to its shareholders. Before it does that, however, it must pay corporate taxes on its earnings. Assuming a total thirty percent tax bracket, the $1 dividend has just been reduced to only $0.70 actually received by the shareholders. The $0.70 will also be taxed on the individual shareholders' tax returns. If an investor is in a combined (cumulative federal and state) tax bracket of forty percent, then there goes an additional $0.28 lost to taxes. So, of the $1 announced dividend, the investor is left with less than half that amount after taxes – only $0.42, to be exact. But perhaps , ``a bird in the hand is worth two in the bush.`` And, it is an indication that companies are truly financially successful, because they actually have money to pay the dividends (not just profits on paper).

    Many large corporations provide dividend reinvestment plans (DRIPs) for their stock. These programs allow investors to buy company shares directly from the company, void of all brokerage commissions or the need to buy round lots, and the company will reinvest the dividend into additional company stock. In fact, dividends can be used to buy fractional shares of stock. Most companies also allow partial participation where the stockholder can specify the amount to be reinvested and the amount to be paid as cash. While DRIPs are excellent investment vehicles, they differ from stock dividends in that taxes are due on the reinvested dividends in the year that the dividends are earned. (Do you pay tax again when you sell the share in the end?)

Avoid Wasteful Spending

There are many other ways of avoiding wasteful spending:

  • Trim Your Subscriptions

    Magazines, DVD mail rental services, gym membership you purchased as part of a New Year’s resolution that you don’t use?

  • Avoid Banking Fees

    Pay your bills on time. Late fees can be as much as $40 or more. Keep eating lunch out at a minimum. Spending only $10 a day on lunch while at work can cost nearly $2400 per year.

  • Learn to Cook

    Cooking at home saves on your food budget and it could even improve your dating prospects -- who isn't impressed by someone who can prepare a great meal?

  • Enroll in a 401(k)

    If your employer offers a 50-cent match for every dollar you contribute, even adding $60 a month will net you over a grand a year. Plus, you defer paying taxes on your contributions, so they take a smaller bite out of your paycheck. See how even small amounts can add up.

  • Raise your car insurance deductible

    Upping your out-of-pocket outlay from $250 to $1,000 can save you 15% or more off your premium. Learn more about how to save money on your car insurance.

  • Pay off your credit card

    Carrying a $1,000 balance at 18% blows $180 every year on interest that you could put to better use elsewhere. See Climb Out of Debt Faster for help.

  • Go Green

    Control energy costs with a programmable thermostat. Prices start around $50, but you'll cut your heating-and-cooling bill by 10-20%. For more energy-saving tips, see Your Energy Crisis Solved. Bundle up. Getting a package of phone, Internet and cable from one provider can save you about $50 a month. Learn more about bundling deals.

  • Use your employers FSA

    Flexible spending accounts let you pay healthcare costs with pre-tax dollars. If your company offers them, take advantage and save 33% or more.

  • Get a credit card with rewards

    Spending $80 a week on gas and groceries? Putting it on a card with 5% cash rebates will earn you nearly $200 a year. Negotiate your rate. Instead of paying an APR of 18% on your credit card, call your issuer and ask for a lower rate. If you have good credit, your lender might consider it and if you can provide examples of offers you've gotten from other companies, it'll strengthen your case.