Cents and Sensibility
Cents and Sensibility
Question: I just can't seem to save enough money to invest. What do you suggest? Even saving small amounts
can add up over timeAnswer: I suggest incorporating an investment plan into your budget. Nearly everyone has some type of budget to which they can add a monthly investment. It doesn't have to be a large amount.
For example, if you invest $50 per month and earn a compounded return of 8 percent annually, you'd accumulate $12,000 to $13,000 in 12 years.
Compounded return means you leave your initial investment and any interest it earns alone to earn more interest.
This example isn't intended to provide specific returns. Instead, it gives you an idea of how quickly even a small investment can add up.
Here's another approach: Each month, have a set amount automatically deducted from your checking account and invested. Many investment firms and mutual fund companies offer this option.
On a set date each month, the company will deduct a set amount from your account and invest it in an investment of your choosing.
This money can be invested in a number of different types of investments, including mutual funds and stocks.
These monthly transactions are reported on both your bank statements and the statements you receive from the mutual fund or investment firm.
If you participate in a company-sponsored retirement plan, have a set amount deducted from your check each pay period and contributed to the plan. An excellent time to start such a program is when you get a pay raise. If you invest the difference in your paycheck, you'll never get used to spending the extra money, and you'll never miss it.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com