Stacking papers - How to start investing - Pt.1

Have you ever wondered how you can go about setting up an investment program that does not require lots of cash? Well don’t feel alone because there a many people out there just like you. Weather you are in your teens, twenties, thirties or forties there is an investment plan for you. The worst investment plan is not having one at all.

Most people would love to be financially independent but unfortunately most of us are not. We live pay check to pay check always a step away from the poor house because we have no savings. Every year our expenses go up while our earns barely move and what ever little money we have in the bank is earning very little interest while we are charged high service charges. How do we get out of this position?

Are you willing to do what it takes to have a financially independent life style? It is going to require some sacrifice from you. As the saying goes no pain no gain, the trick is to be able to manage the pain so you can have the gains.

Lets start by first examine our current financial status. Let’s assume we are living with in our means, we spend no more than we earn. However the bad news is that we spend all that we bring home on a monthly basis. We must then look at our expenses and put them into two categories.

1. Essentials
2. Non-Essentials

In the Essentials category we will put things like rent, transportation, food, clothing, etc. In the Non-Essentials category would be things like going to the movies, eating out etc. Now let’s say you found that you spend $100 a month on things you could live without and you decide to save that money each month in an interest bearing account that pays say 3% interest yearly compounded on a monthly basis. How much money will you have in say 5 years?

So you start with $100 and will add $100 each month to you account. That will give you $1200 for the year. Over a five year period you would have saved $6596.99. $6000 in principal which is the money you put in and $596.99 in interest. So your money earned you an extra $596.99. If you did this for ten years you will have saved $14144.01. Your interest earnings $2144.01 you didn’t have to work for.

So you see the longer you keep your money in a compound interest savings account the more interest your money will earn you.