Okay I completely forgot about this...but here it is! Unfortunately it won't let me edit those reserved posts....great.
Big disclaimer here: I am NOT a financial professional or expert. Read this for entertainment or for my opinions only. This is NOT to be taken as advice.
Once you've figured out why you should invest, the next step is learning how. We'll break that question into two parts. First, we'll talk about how you can structure your financial life to make it possible to invest. Then, we'll delve into the mechanics of investing, such as opening a brokerage or mutual fund account.
What is investing?
Investing is NOT to be confused with gambling. If you study the market, study your funds/stocks and understand it holistically, you are investing. If you are buying a company cause you like their product / heard someone say they think its a good investment, it is a speculation.
Investing money involves putting that money into some form of "security" -- a fancy word for anything that is "secured" by other assets. Stocks, bonds, mutual funds, and certificates of deposit are all types of securities.
As with anything else, there are many different approaches to investing -- some of which you've probably seen on late-night TV. A well-dressed, wildly positive (though somewhat whiny) young man sits in front of lazily waving palm fronds, shaking his head about how incredibly easy it is to amass vast wealth -- in no time at all! Well, hey! That sounds fine! But if it were so easy, wouldn't everyone who saw the same pitch be rich? And how come you always have to send in money to learn those wealth-building secrets?
Instead of shelling out $500 for that EZ MONEY course, learn from me, or from money magazine, or buy a good book http://www.amazon.com/Intelligent-Inves ... B0002X1JKU for much less.
Step 1: drop your debt!
Simple formula driven by simple logic:
If loan interest > expected investment return, pay the loan rather than invest.
Ie: 25% APR Credit Card is > 5% CD. If you invest $100 in the CD, you earn less money than the same $100 of debt will cost you.
Investing without paying down the debt is like running a marathon without stretching or pouring syrup on the plate before you make the waffles.
Step 2) Budget! Pay yourself first
Now that you have paid down your debt, its time to make a budget. Take your monthly income and separate out your expenses. How much does it cost you to live each month? Calculate that out and put 6 months worth away in a savings account. Anything above the 6 months expenses is okay to play with!
Step 3) Save money!
The best way to accumulate money (and make it compound) is to save money.
A) Pay down those credit cards. Especially high interest ones FIRST!
B) Correct your tax status. Enjoy getting a big fat refund at the end of the year? So does the government, because they don't have to pay you a cent in interest on the money you overpaid them by failing to properly account for your tax status. Too many Americans overpay on their taxes during the course of the year, cheating themselves out of money-generating returns. While it's impossible to predict exactly what you'll make in the course of a year, sit down and determine what your rough tax implications are now to ensure you don't grossly overpay in 2013!
C) Make 401k/402b/IRA contributions.
If you are right over the cusp of a tax bracket, get yourself into the lower bracket by reducing your income. An easy way to do this is with IRA contributions. This money comes out of your income pre-tax, and if it puts you into a lower bracket. Want a nice tax deduction while investing for your future? Many corporations actually offer some form of contribution match on 401(k)s, which is free money, and IRAs allow money to grow tax-deferred until you take withdrawals from the account. Both are usually tax-deductible. Don't need a tax deduction? Consider a Roth IRA or Roth 401(k) instead, which lets your money grow tax-free.
D) Still paying checking fees for your bank account? Well, stop it, right THE HECK now! Between the emergence of local credit unions that rarely offer account fees and the ability, with most large banks, to simply sign up for direct deposit and avoid checking fees, there are many ways you can get around a $5 to $7 monthly charge for "holding your cash." Never pay a banking fee. Of any kind. EVER! Do you hear me? NEVER!!!
E) Buy generic!
One of the easiest ways to save one dollar at a time is to switch to generic items whenever possible. With prescription drugs this isn't always possible, but with everyday items at the supermarket like cereal, batteries, and meats, it can make quite a difference. With no brand-name premium or middleman to deal with, grocery stores can offer store-branded merchandise far cheaper than brand-name products.
F) Donate!
Finally, while this may sound counterintuitive, donate to those less fortunate than you if at all possible. Donations are tax-deductible and ultimately help put more money in your pocket come tax time by reducing your taxable income. Whether it's for the poor, the sick, or another cause altogether, your donations make a difference in the lives of others.
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