Financial Planning Tips For Newbies
While it's just common sense that saving money is a smart move, we don't always know how to set up a savings plan for our retirement years. There are so many types of investments, and with so much economic instability these days, it's difficult to know where we should put our money. However, if you haven't begun to save for your golden years, there is no time like the present. Here is some helpful information that will help you formulate a retirement plan.
There are quite a few different options for investing, and one that is both easy and relatively low-risk and affordable is investing in a 401 (k) plan. These plans are typically offered through your work, and the great thing about a 401 (k) is that most companies will match some of the funds that you place into the account. Your company might match up to any amount from $1,000 to $50,000, depending on the size of the company and your particular level of income. At any rate, it just means that if you save $200 out of a paycheck for your 401 (k), your boss kicks in an additional $200 into the account as well, which is basically just free money.
When you are young and your salary is low, setting aside money can seem really difficult as you just don't have a ton of disposable income after paying bills and rent. However, if you were able to save $200 per paycheck and your boss also added $200 each paycheck, in just one year, you would have $4,800 saved, not counting any interest earned. Even if you stayed at the same salary for 40 years, by the time you retire, you will have more than $100,000 in the account. However, salaries do typically rise, you can add more and the more you add the more interest you earn. Often, people who invest continuously in their 401 (k) have more than one million dollars in savings.
The 401 (k) plan is certainly not your only option, and you can create more than one type of retirement account. The IRA, or individual retirement account, is yet another option and you can have both an IRA and a 401 (k) if you wish, as they both work a bit differently and have different tax implications. Sometimes your employer with have an IRA and will match funds, and if not, many banks offer IRAs as well. So check out your company's offerings as well as what your bank offers to see what will work best for you in the long run.
Playing the stock market is risky, but the returns can be quite handsome. Of course, the losses can be terrible, as well. Generally, it is risky to put all of your money into just one company, but investing in mutual funds can be a way to take advantage of the stock market with much lower risk. Mutual funds are a special type of fund that includes a variety of different companies. This variety means that you aren't depending on one single holding to produce results. The diversity in the fund lowers the risk but often pays out much more than any type of savings account. So over the course of many years, you potentially will enjoy much more growth without as much risk as a single stock.
Just as there are many industries and many companies out there in the market, there are thousands of mutual funds. Talking to a trusted finance advisor is always a smart idea before you invest. There are many mutual funds, and each focuses on something specific. For instance, a green energy fund will focus on alternative sources of energy such as companies who work with solar power or wind power. A China fund will focus on holdings or companies that are based only in China and Hong Kong, and these companies will be from a variety of industries, from technology to banking. There are mutual funds for just about every country, region or industry imaginable, so there are plenty of interesting investment choices to consider.
There are quite a few different options for investing, and one that is both easy and relatively low-risk and affordable is investing in a 401 (k) plan. These plans are typically offered through your work, and the great thing about a 401 (k) is that most companies will match some of the funds that you place into the account. Your company might match up to any amount from $1,000 to $50,000, depending on the size of the company and your particular level of income. At any rate, it just means that if you save $200 out of a paycheck for your 401 (k), your boss kicks in an additional $200 into the account as well, which is basically just free money.
When you are young and your salary is low, setting aside money can seem really difficult as you just don't have a ton of disposable income after paying bills and rent. However, if you were able to save $200 per paycheck and your boss also added $200 each paycheck, in just one year, you would have $4,800 saved, not counting any interest earned. Even if you stayed at the same salary for 40 years, by the time you retire, you will have more than $100,000 in the account. However, salaries do typically rise, you can add more and the more you add the more interest you earn. Often, people who invest continuously in their 401 (k) have more than one million dollars in savings.
The 401 (k) plan is certainly not your only option, and you can create more than one type of retirement account. The IRA, or individual retirement account, is yet another option and you can have both an IRA and a 401 (k) if you wish, as they both work a bit differently and have different tax implications. Sometimes your employer with have an IRA and will match funds, and if not, many banks offer IRAs as well. So check out your company's offerings as well as what your bank offers to see what will work best for you in the long run.
Playing the stock market is risky, but the returns can be quite handsome. Of course, the losses can be terrible, as well. Generally, it is risky to put all of your money into just one company, but investing in mutual funds can be a way to take advantage of the stock market with much lower risk. Mutual funds are a special type of fund that includes a variety of different companies. This variety means that you aren't depending on one single holding to produce results. The diversity in the fund lowers the risk but often pays out much more than any type of savings account. So over the course of many years, you potentially will enjoy much more growth without as much risk as a single stock.
Just as there are many industries and many companies out there in the market, there are thousands of mutual funds. Talking to a trusted finance advisor is always a smart idea before you invest. There are many mutual funds, and each focuses on something specific. For instance, a green energy fund will focus on alternative sources of energy such as companies who work with solar power or wind power. A China fund will focus on holdings or companies that are based only in China and Hong Kong, and these companies will be from a variety of industries, from technology to banking. There are mutual funds for just about every country, region or industry imaginable, so there are plenty of interesting investment choices to consider.
About the Author:
Cleveland Jernigan loves writing about investments. For further information regarding Asian Pacific mutual funds, click here. Or to discover a China investment fund, go to these fund sites now.
