Personal Finance Tips that Will Save Your Life

As I approach retirement I am so glad, as a young man, I made the decision to stay in a lower income lifestyle and give some of every paycheck to an IRA or a 401(k) as these funds have appreciated and allowed me to finance a great lifestyle and help my family.

It is very hard in your twenties or thirties to see the advantage of investing into retirement but when you are looking at retirement on the horizon you realize the importance of regular investment for your later years.

401(k) Plans

You are limited to what you can investment in when you hold a 401(k) but if your employer is contributing based on your contributions it's important to take advantage of the free money they are offering. I know you need to stay 5-7 years to become fully vested but it's still worth the effort.

I would just invest in a S&P 500 Index. Almost all the plans offer them. That way you will beat 85% of the mutual funds in the marketplace without the outrageous fees. It's about as safe as it gets in stock buying.

A pitfall to avoid is investing more the 10% of your contributions in company stock. You will see people do it, but resist the temptation because more people then you realize have lost everything when the high flying company goes bust and they get laid off. Think about Enron.

Self Directed IRA's

If you believe you will be leaving in say the next year invest in a self-directed IRA. Learn the ropes of stock investing so you can stay away from mutual funds or other basket type investing that doesn't do as well over the long haul as you are told. Also they drop like a rock when the market starts down.

Start by investing in large cap stocks you are familiar with and that pay at least a 3% dividend. That way if they drop you are still being paid something. Reinvest the dividends in the stock so you are growing your position as well as your dividend.

Think about the world around you and read everything you can get your hands on so you can learn about investing and theories behind investing. This will help you understand how to buy low and sell high, which is how you make money in the market.

Stay away from tips as they rarely pan out. You are smart enough to invest in what you know. If you are a doctor look at healthcare stocks and understand were you think the healthcare trends will take this sector over the next 5-10 years and invest accordingly.

Themes are another way of investing. Smart phones have been a great theme for a couple years. Invest in manufacturers, retailers, and parts suppliers to offset some of the risk. Other themes I follow now are oil suppliers, drillers and engineers that stand to make money off oil that is rising thanks to our middle eastern brother raising chaos in the desert.

What ever you decide do it now and don't procrastinate. You someday will wake up and say wow that was a smart move.

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