Money for the Long Haul

I still hear people talking about pulling out of their mutual funds and dropping some of their investments...and then buying something else. I mean, we all know the market is bad right now. I used to be a Chicken Little myself, but I've come to realize it's the turtle that wins the race and not the hare. You don't have to play the lottery to win millions either....you have the simple formula right in front of you. You don't even have to do anything beyond the initial set-up. Retire a millionaire with these simple steps.

• Get in the right mindset. Making money should really be automatic. You need to let your money work for you. If you let it "do it's thing", it's going to work through the miracle of compound interest.

• Don't listen to the "sky is falling" doomsayers. I used to listen to them babble about "the Dow Jones average fell 20 points today", and I guess we were supposed to get all upset over it. Never more. Look back 10, 20, 30 years. Has the stock market ever been less now than it was back then? No it hasn't, even during the Great Depression compared to now. So stop worrying about the ebb and flow of the tide...THIS IS NORMAL and this too shall pass.

• Know how much is going out vs what is coming in. I admit we spent YEARS not following this. We were just lucky that we were living within our means and we had money left over every month. Most are not so fortunate. I shudder to think what would've happened had it gone the other way. We really had our heads in the sand back then. You don't necessarily have to have a budget, just have a general idea of how you spend your money. You can follow along here.

• Do not buy high and sell low. Any financial guru worth his salt will say to buy low and sell high...but who wants to sell winners? This is mostly for short-term financial goals and buying individual stocks, which I try to stay away from. If you are in the stock market, invested in good growth stock mutual funds, you should be staying in til you retire or you need to re-balance your portfolio.

• Invest the most you can in your IRA and/or tax-free 401k, hopefully 10-15% of your paycheck. Take it off the top of your paycheck immediately and automatically. Pretend it isn't even part of your pay. Many companies, and I know the government, will take it right off the top, before it gets taxed, and invest it as you designate. We do this with our kids' college money too. That way, we know the rest has to be divvied up into our basic necessities and then our wants....in that order!
  

• Don't put all your eggs in one basket, and if it sounds too good to be true, it probably is. It's all about risk and the probability of probabilities. Diversify! Not just in the types of investments, such as stock funds, bond funds and international, but also in the types of industry, such as medical, consumer goods and banking. Take for example the mortgage market right now. Those companies that are involved in that field are not doing so hot right now. But, if you've invested in other areas too, those losses can be offset by the areas that are doing well. And, NEVER put all your money in one fund or something that touts to be a big winner. Even if it's not shady, the risk to lose it all is just too great. Don't do that to yourself!

• Face your income problem. I've gotten email from folks who say they are living hand to mouth and don't have a cent extra to spare or much less save. In that case, they have an income problem, especially if they have a family. You do have a few choices. You can get another part-time job to bring in some extra cash. Delivering pizzas can be a great way to do this on on a more flexible schedule. Many times, this only has to be temporary in order for you to get a leg up. Another option is to try to move up in your current job. Take on more responsibility. Volunteer for it. Offer to be in charge when a special project comes up. Make your company more money. Then you will be in a position of strength when it comes time to ask for a raise. Plus, you'll really deserve it. The other option is to get more education so you can get a better paying job. You'll have to weigh the risks and costs here. More education means you have to spend more money. Will the money you spend now, which you don't have, be offset by a higher paying job in the somewhat near future? If not, then don't borrow money to go to school. Pick another field that will pay off. I know someone who spent over $100k to get her doctorate and to be a professor, and now she can't find a job because she is in such an obscure field that is low paying to begin with. You need to research this stuff ahead of time, before you take the leap.

How are you socking away money for the long haul? When did you first start saving? If you aren't saving yet, what roadblock is keeping you from getting started?