Don't make these credit card mistakes

1. Making only minimum payments

   Doing this stands the investment pyramid on its point. The magic of compounding is extremely powerful and works both directions. When we make minimum payments that magic works for the credit card company and they keep more of our money. If we can't pay our credit cards in full every month, we shouldn't get one.

2. Paying to own one.

   There are many credit cards that offer no annual fees. If our credit isn't good enough to qualify for one, we shouldn't get one.  We should spend time repairing our credit, until it's good enough to get a free card.

3. Taking out a loan or cash advance.

   The interest rates and fees for these are exorbitant. We would be better off borrowing from almost any other lender at a much lower rate.

4. Not paying on time.

   This should never happen. We can pay so many different ways in this age of technology. I like to pay online and print my receipt. We can pick the day drafts are withdrawn from our checkbook. If you have a tendency to pay late, set up repeating monthly payments. Making late payments will lower credit scores and increase future loan costs also. Finwiz.

How much should we save before becoming an investor? Why emergency funds are so important.

   Everybody will have a different goal and opinion on this question. It is going to be up to us to decide when we can enter the investing world. Let's try to outline some general help to set an individual goal. Many people fail to understand the essence of investing is long term. People save a little, and then when that foreseeable but unplanned emergency comes along, they withdraw the funds to pay for it. Many stay in this cycle and never get out of it. We aren't ready to start investing until we KNOW the money won't be needed for at least ten years. This means we must have an emergency fund or current cash flow to pay for the unplanned expenses that come along. Emergency funds become the base of our investment pyramid that keeps the plan from collapsing. Once an emergency fund is established feel free to invest as much or as little as you like. Finwiz.

The reason we need to be focused on net worth

    Our net worth is defined as total assets minus liabilities. Basically these are the amounts accumulated in our investment accounts plus any personal property minus debt. This sounds boring at first so why should we focus on it, at least annually? I may not be super wealthy, but I know how they think about money. Wealthy individuals live off of interest and dividends. They don't touch the golden goose. The golden goose or principal that generates these earnings is their net worth. When our net worth can generate an income big enough, we can do what we want with our time. This could be working part time for some, or retiring all together for others, it's our choice. Everybody's golden goose or net worth number is going to be different. There is a tipping point where an individual starts to realize they have enough, depending on their income goals. See you next time Finwiz.

Understanding inflation and reducing its risk to our savings

   It's important to understand the risks inflation have on our savings over time. Reducing some of these risks is possible. Be smart about debt. Pay off high interest debt first or refinance at today's lower rates. This will increase cash flow for savings or allow more of our payments to go to principal reduction. Inflation has averaged around 3% annually. The spending power of our savings is eroded over time if we don't earn at least that much on our savings. I think Treasury Inflation Protected Securities, or TIPS for short, should be at least a small part of every portfolio. TIPS pay a variable interest rate based on the inflation index so spending power of our capital is protected. This does limit our upside for growth, reducing risk also has its costs. Having the right mix of stocks and bonds like TIPS is going to be different for everyone. Generally, we should add more bonds and less stock to our portfolios as we age. We want to reduce the risks of stock market downturns just when we start to withdrawal from savings. Finwiz.

People seem to concentrate on the wrong risk when investing

    Many of us never start to invest or save because of the risk of losing money. It takes a long time to save and invest enough to retire someday. Some never start because it's not easy, and the risks just seem too high. The truth is, after saving for many years, we could end up falling short of our goals and plans. The other alternative is to live for today and not save or invest at all. This solution does take all the risk out of saving and investing. With this solution we will be guaranteed to end up with zero. We will have zero money saved, zero money earning interest income, and zero percent chance of ever retiring. The choice is up to us, Finwiz.

We can still make 2011 IRA contributions and reduce our tax bill

    We can make contributions in our IRA accounts for 2011 all the way up to the tax filing deadline of 2012. This helps in a couple ways. First this means not all tax planning needs to be done before the end of the year. Those of us just starting to save can get a jump start because of this rule too. Basically this will allow contributions to IRA accounts for both 2011 and 2012 to be made simultaneously between January and the middle of April every year giving a boost to account balances for new savers. Finwiz.

Three investment mistakes to avoid this year

1. It's our time in the market not timing the market

     Many investors try to time the stock market's peaks and valleys. Timing the market has proven difficult over long periods of time. An investor that dollar cost averages ( adding to investments on a monthly basis ) has a much better record of returns over long periods of time.

2. Being under diversified

     Don't put all our eggs in one basket. We've all heard that before. This one is true however. Allowing too much to accumulate in company stock or even one type of mutual fund could be a mistake if that company or market segment reports bad news. Review investments over time; don't allow more than ten percent of your portfolio to accumulate in    one stock or mutual fund.

3. Not watching expenses

     Reducing the cost of investing is another way to save. Find a broker with no minimum balance or inactivity fees. There are many no load mutual funds to pick from, and there is no reason to pay high fees to invest. See you next time, Finwiz.

How to get started saving with small amounts

  Most mutual funds have minimum initial investments of at least $2,000. How do we get started investing when we don't have much money to start with? I started by saving $50 a month until I reached the initial minimum investment. A second option would be to open an IRA at a local bank and have deposits automated from a checking account. If you have access to a 401K plan through your employer, sign up as soon as you're eligible. These plans usually allow contributions as a percentage amount, not dollars. The point is to get started somehow and as soon as possible. The sooner we get some kind of savings plan in place, the faster our savings can start growing. Finwiz.