Finding Money To Invest

There are many other ways you can find extra money to invest.

Shopping

Have a low-key attitude about buying new things. Do not try to impress others. Shop with a list. Before purchasing, place any items not on the list off to the side. Select only one (if any) of those extra items to purchase. Clip and use coupons for items ordinarily purchased. Track down bargains at off-season clearance sales. Shop at lower-priced food stores. Wait to buy until the cash is available. Ask merchants to match pricing found on the Web.

Dining & Entertainment

Take a lunch to work at least twice a week. Set up a regular grocery shopping and cooking schedule. Prepare home cooked meals on weekends to enjoy on weekday evenings. Cut back on vacations and expensive nights out. Go to matinees instead of evening shows. Rent videos & DVDs instead of going out to the movies. Return videos & DVDs on time to avoid late fees. Use the public library.

Financial Accounts & Investments

Pay off credit cards every month to avoid interest rate charges. Pay bills on time to avoid late fees. Select a no-fee checking account with a minimum balance requirement that you can meet. Have paychecks direct deposited to eliminate fees. Shop for lower commissions and fees.

Automobiles

Buy a used car instead of a new one. Raise the deductible on collision and comprehensive auto insurance coverage to at least $500.

Where Can I Stash Cash Before I Invest?

There are many short-term, interest-bearing parking places where you can keep money you find prior to investing it. Three common savings vehicles include:

• Passbook savings accounts: This standard account is FDIC insured and generally requires no minimum balance.
  
• Money market accounts: This FDIC insured account pays higher interest than a savings account and offers limited check-writing. Minimum balance requirements generally must be met in order to avoid a monthly fee.
  
• Money market funds: This mutual fund invests in short-term, high rated government and corporate debt securities. This fund is not FDIC insured. For this reason, a money market fund typically pays a higher interest rate than a money market account.

How to Create an Invesment Policy

A written investment policy is probably the most important part of any investment plan. Before buying any additional investments, take the time to develop your own personalized investment policy listing specific selection criteria to be used when investing.

Make sure to include a well thought out sell plan. For example, individual stocks should be purchased with a targeted sell price in mind on the upside as well as the downside.

The Importance of Diversification

The purpose of diversifying your assets is to balance the risk and potential return of an investment portfolio, rather than to generate the highest possible returns. Investments should be spread across a variety of investment vehicles and industries so that your net worth is not dependent on the performance of only one market sector. Be careful not to own more investments than can be reasonably managed.

A Special Note on Company Stock in a 401(k) Plan

Unlike mutual fund choices, investing in company stock is a non-diversified investment. Financial professionals generally agree that no more than 5-10% of retirement funds should be invested in company stock, no matter how promising the financial health of the company. Note that company pension plans cannot invest more than 10% of their assets in a company's own securities. Carefully review what percentage is invested in company stock versus your entire portfolio.