Step 6 Save and Invest


	Save and Invest! You need to plan ahead to save and invest properly. Once you start to see the light at the end of the debt tunnel you'll want to start planning on how to save and invest for your future. There are plenty of sites out there to give you stock market tips, and tell you specifically where to invest your money. I'm going to tell you overall strategy, and some tips and tricks that will accelerate it. You'll use some of the same principles that we used in the pay down debt section. Particularly using a high interest savings account / checking account to be our main account, instead of a regular checking account. When the balance on that account reaches a transfer point, you decide if that's $500 or $1000, you'll transfer that money to your main investment account. You'll want the equivalent of at least 6 months of income in a liquid account. Liquid means different things to different people. To me it means you can get your money transferred into your main account without penalties. A 401K or Roth IRA for example are not liquid accounts until you are to your retirement age, typically around 67. Your liquid account might be a stock account, a mutual fund, a money market, or just a high interest savings account. You need to ensure that 2 weeks worth of income is in an account that you can transfer money to your main account within 3 days, CD's for example you get penalties for withdrawing before maturity. This allows you to quickly gain access to your money if some type of emergency arises. In the short term 2 weeks will get you by until you figure out how much you'll really need, and start that process to withdraw at a regular interval for income replacement. Once you figure out how much money is required in the different accounts, you can start to fund those accounts with the transfer from your main account. I suggest you setup a scheduled transfer, once you get some of your bills paid off, and are paying on loans that are lower interest rates, below 10%. A scheduled transfer once again keeps you on track, and disciplined, you need to start to save and invest, particularly fund your emergency savings. This will help you avoid getting back into debt because of an emergency. Once you have all your debts wiped out, you can really save and invest. Don't make the mistake of buying a new house with your equity and available monthly income. If you are in a house that is sufficient, stay there, at least until you can pay cash for your dream house. This protects you against a loss of income, and therefore losing your home due to not being able to make the payments. Join our Free Debt Forum and get a free EBook! The goal of the save and invest phase is to have all your money working for you, and doing what you want, and not being obligated to anyone. If you were to lose your job, you'd have savings to live on, and with no debt, that savings will last a long time. 6 months of income against only basic bills will last possibly a few years, this is because you will be withdrawing from savings, instead of depositing, so your budget changes. Another goal you'll want to figure out, is how much money you need in your investments to provide your annual income from interest. Once you figure out what that number is for you, you'll want to probably pad it by 10% or 20% to ensure it continues to grow. If you plan to just break even by putting in a death age of 95 or something, it's a bad idea, because by the time you reach 95 the average life expectancy might be 120! So plan your retirement savings to never run out! So regardless of how old you are, you'll always have your income. Plus if you pad your savings a little, and have it grow instead of shrink, it will take into account inflation a little bit. If you save and invest properly, starting as young as possible, you'll have a much happier retirement. The beauty of this whole program is once you have your target dollar amount in your investments, you can quit working because you have to, and only work if you want to. I know for me, I will never fully retire, because I just get bored. But it's a choice. And don't put social security or any government retirement program in your planning. Only plan on yourself. If you get any government retirement consider it a bonus. If you have a hobby that you can make a little money at, maybe you can do that instead of your full time job. You don't have to wait until you reach the age the government says you can retire, you do it when you are ready. And don't plan on your home equity being part of your retirement, because the market could go bad, and you might not be able to sell it. Once again if you sell it, and get a nice chunk of change, consider it a bonus on top of your save and invest plan. We'll talk more about retirement in the last step, debt free living! Again there are plenty of websites out there to help you plan specifically for retirement, I'm just going to help you manage the overall plan. Move on to Step 7 Debt Free Living! Return from Save and Invest to Debt Management Plan Home Page

Save and Invest!