Making the Most of Your Money

If you feel you have a better understanding of your income and have a budget that covers your expenses, you have succeeded in taking control of your finances. But some people want to take the additional step of making their money work for them (earning money off of their money.) This can be a fun and rewarding process, but it can also be complicated and risky. Not all types of investments are guaranteed to make you money – sometimes you can lose the money you already have.

This final section of the course is meant to introduce you to some of the most common ways that people invest their money. This is to help you better understand your options and things that you may come across if you decide to learn more about managing your finances. It is not meant to be financial advice or recommendations for how to handle your savings.

Investing

There are many ways to increase your income by investing savings and spending money wisely. If you have started to set aside money, you may want to find a financial advisor to help you make financial decisions. This may be a trusted friend or relative who handles their own money successfully, someone at a bank or financial institute whom you trust, or a lawyer or stockbroker at a reliable company.

Whomever you choose, be sure they have a good reputation, are trustworthy, make you feel comfortable, can clearly show how they are handling your money and what (if anything) they are charging you for. Above all, be sure that you keep control over your money! Your advisor may make suggestions about how to handle your money, but you should know what is happening to your money and make all final decisions (including deciding not to let the person handle your money anymore if you aren’t happy.)

There are many ways to invest and spend money wisely. Below is a list of some of the more common methods. You can find out more about each of these at your library, on the Internet, from a bank.

• Savings Accounts – As mentioned in other sections in this course, savings accounts are an easy way to make your money work for you by earning interest. Talk to local banks about the different types of savings accounts they have and what type of interest they offer.
• CDs (Certificates of Deposit) – Many banks often offer Certificates of Deposit or CDs to their customers. The advantage of CDs is that they usually give you a higher interest rate on your money than savings accounts. The disadvantage is that you usually have to commit a certain amount of money (anywhere from $100 to thousands) for a certain amount of time (anywhere from 6 months to several years) to earn that higher interest. While you can have access to your money in case of an emergency, you usually lose the interest you are earning, so when purchasing a CD, you want to be sure you can commit to the full length of time.
• Retirement Accounts (Company accounts and IRAs) – Some employers help their employees save money by offering them retirement accounts. These are long-term saving accounts that are available to you once you reach retirement age. The advantage of starting a retirement account through your employer is that your employer often donates money to your account in addition to what you deposit. However, not all companies offer retirement plans. One of the best options is to start your own retirement account. These are call Individual Retirement Accounts or IRAs. You can usually open an IRA through your local bank, a lawyer, or other financial advisors. There are several different kinds of IRAs, so be sure whomever is helping you open one explains the differences. Some people choose to open an IRA in addition to their company retirement account.
• Stocks/Bonds – Another way to invest your money is to buy stocks or bonds. This is a way of investing money in a company, then sharing in the profits (or losses!) of the company. While investing in the stock market can be a good way to earn money, you can also loose money if the company (or the entire stock market) does poorly. Before investing in stocks or bonds, you need to be very clear that you understand how investing works, the company or bond in which you are investing, and be prepared to invest your money for a number of years. Most people who make money off the stock market, make money by holding on to investments for many years, not buying and selling quickly. If you are interested in investing in stocks and bonds, again, talk to several trusted financial advisors.

Manage your money always carefully and wisely, then you will not face any regrets. -mtstcil.org