Spend Below Your Means; Invest Within Your Means

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source: http://www.mint.com

You might be spending below your means but such is not enough to fully achieve debt-free and financially free status.

The other half that you should focus on once you have mastered your spending is knowing how much to invest. Investing is something that is not equated to having your own business or running your own online store. Investing is making your hard earn money work for you. Investments should be the source of your passive income.

If that is the case the solution then is to have lots of money and invest it? This is so easy to those big honchos and born with a silver or golden spoon but such is not impossible to us salaried and savers.

A lot of people have this mistake of investing all their cash to stock, loan, or some investment company but eventually lost a lot because the stock market is bearish for the longest time and was forced to sell at  a loss, the borrower became bankrupt and can't pay a single penny or worst run away with your money, and the worst is investing in a scam.

  

That is why you should only be investing within your means. Always remember the rule of only investing free cash.

Here is what you should do with the limited cash in order to put up a considerable fund as an investment.

1. Set aside a regular free cash every payday

2. Check investment vehicles, learn the ins and outs first, 

    and list down the best

3. Time is your ally

4. Invest when  such investment is down, sell at profit

5. Set aside a big portion of your profits for re-investing.

 

SET ASIDE REGULAR FREE CASH EVERY PAYDAY

I have been telling and advising this for the longest time. In order for small funds to accumulate you have to do two things: set aside a fixed amount and at a regular interval. Always set this aside first before spending your paycheck. Its like dividing your cash and this gets its share first.

Others term this paying yourself first. This concept means setting aside to your personal investment fund first before paying your debts and spending for your wants. This also not only applies to your paycheck but also to any free cash that passes your hands.

CHECK INVESTMENT VEHICLES, LEARN THE INS AND OUTS FIRST, AND LIST DOWN THE BEST

After sometime you might have set aside a considerable sum of money and you finally decided to invest. You heard of this investment saying it guaranties a 12% per month return and you immediately put your money in. At first they pay what they promise until the time comes that they are delayed until one day you learn in the news that the company foiled up and its owners run away with your money. 

Checking and learning about the investment is a wiser idea than just jumping into a popularized investment scam. Also there is lots of good investment out there thus you got to make your list. Having this list will help you a lot in your investment picking. Sort them out based on how safe, how much return, and how much outlay is needed.

TIME IS YOUR ALLY

Time works both ways. At times opportunity comes and you got to seize it; other times patience is really needed.

There are investment out there that comes once in a while. This is the very reason why you should always have a ready set aside free cash to buy such investments. On the other side there are investments that will take longer to materialize. Real property like land don't go up in  a day or a week at most it will take years before its price appreciates. Stocks of new and promising company will take time before their prices rise, they got to prove to the public their capability to generate returns.

INVEST WHEN SUCH INVESTMENT IS DOWN, SELL AT PROFIT

As always follow the simple rule of "buy low, sell high." But lets look at this just like what Robert Kiyosaki of Rich Dad, Poor Dad said: Buy to earn.

That is why time is your ally. Be always on the look out when prices go down. There are signs when such is already happening. Also always set your target. Investing without might lead you to endless expectations that disappoint. Once your investment its target make profits don't wait and don't regret selling it you might not know when will such profit level can be achieve again.

SET ASIDE A BIG PORTION OF YOUR PROFITS FOR RE-INVESTING

This is where many falters. After making a big profit they are happy and party and end up spending what they have earned. One should re-invest on top of the original  investment profits that you make.

But it does not necessarily mean all the profits, of course you need to celebrate your victory. Of the profits re-invest about 50-70% and the 30% for your personal wants. But  would it be greater if you share your profits? Why not share a part of that 30% to those who are less fortunate? I bet you will find more joy in that rather than spending it all in your unlimited wants.

Why do you have to invest?

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source: http://www.9negroup.com

They say this is the best time to invest in the stock market. Why is it the best time? It is because you are able to buy shares of a good company at bargain.


But you are confused.


The news is that the world market is collapsing with the Greek Debt crisis and the gloomy economic outlook in United States why do I say that this is a good time to invest?

source: http://www.hotslive.com

But before we discuss deeper into this I guess the best start for this is for us to define what really an investment is. 


Investment in simple term means a set aside money put in something that gives you back money. 


Simple but a lot of people still don't get the idea about this. A lot of people put money in a savings account and call it already investment. Yes the bank gives you back money by way of interest. I will call this sound investment if we are in the 70's or 80's where interest on savings are in the range of 5-10% but now I would like only to put money in a savings account for emergency fund purpose because banks nowadays pay 0.5-1% only even time deposit are within that small range.


That is why we have some alternative vehicles or funds where we can put money to give us back money. Remember the definition investment is a set aside money that will give you back money. That is why if you read my post about how I divide my earnings into 6 funds one of them is Investment Fund. We have to set aside money for this purpose.


Now let’s focus on investments. I will discuss some investment vehicles and how does these investments give back money.


Many say put it in small business like a computer shop, a taco shack, or a small food cart. Yes this is a good step to becoming into an entrepreneur but if you are inexperience and your funds are limited you might not be able to start it. So while accumulating enough money for the startup engage yourself in learning how such small business operate. Look at established small businesses around you and learn how they started, how they struggled and how they became and continually be successful amidst the economic slowdown. Business gives us back profit. What we can do with the profit is either to re-invest it to the small business, set it aside for another venture, or save it in a savings account for emergencies.


Some banks now offer what we call Unit Investment Trust Fund or UITF. The amount needed to invest in a UITF ranges from 10,000 to 100,000 pesos and has various holding period. UITF are investment funds, not a deposit that is why it is not covered by PDIC insurance, return depends on the performance of the stock these funds are invested. This is a way which you indirectly invest in stocks. You get what these funds earn.


Stocks are still one of the best investments. We earn either through dividends or price appreciation. But the problem is people wanted to profit right away. In times like these the best way to invest is to buy stocks of great companies at the lowest possible price and hold them until their price rise to about 30-100% of their price today. It may take long let say 6 months to 5 years waiting period and people always pull out their investments when their stocks are down and so they suffer the loss.


I am not saying invest now right away. Always make it a golden rule to know where you are putting your money. Ask but ask the right person. Ask people who did it and made money and still make money or still not pulling their investments at this very time of global economic crisis. It only means they know something that others don't know that is why they are still holding onto their investments even if price of their stocks went down up to 20-50%.


Also always remember to invest at your own risk. Investing is not a gamble; it is more of a discipline to be learned. That is the big difference between the true rich and the show off rich people. Find a truly rich person and learn from them. Bo Sanchez calls them "mentors', Kiyosaki call them "Rich Dad", and other people call them their "Idol". Go out and seek these people. Listen to them and learn. Apply what you learn from them in small scale and little by little make it to the big deal. If at first you failed it is good that you only use a small amount of your hard earned money and the bonus is you learned something out of that misfortune.


Life is a learning process and mistakes are part of it. So if you made a mistake don't worry as long as you learn something out of it.


So are you investing at this time of crisis? Well it's your call, it's up to you.

source: http://exploringthemind.com

Finding Joy in the gloomy stock market

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source: http://www.legalpad.com

My title might be kinda out of this world or off topic.

I just read Francis Kong's blog post about Happiness and Joy. In this time I know most of us who invested in the stock market don't feel happy because the US crisis and the European Debt crisis is hurting us. Our portfolio has been in the red for the longest time and it seems cost averaging wont allow us to be in the point of even breaking even.

But again as the author Tony Campolo in Francis Kong's blog says many people are in the elevator and yet it seems that because in the elevator everyone is in a gloomy state waiting for their floor so that they can get off and go to their job or meeting. Why don't we enjoy the ride by singing with rest of the passengers. And when we get off why don't we continue singing and enjoy the rest of the day.