A Little Bit of Investment Knowledge Goes a Long Way

Knowledge = power. Are you giving 100% to reducing your debts and improving your financial situation? Have you made enough of progress so you can see the light at the end of the tunnel? Maybe you even have all your debts paid off? If so, then give yourself a pat on back! You deserve it.

Reducing and eliminating debt is a key step in the long path towards financial independence but what is the next step? Investing money which will produce future income is the next step. At some point, you are not going to be able to work anymore – or more likely you won’t WANT to work anymore but how will you survive? Some workers have good pensions they can rely on, the rest will have to rely on Social Security and their own investments for their income. One of the keys to investing is knowledge – it doesn’t matter whether you are planning to do all your own investing or turn things over to a financial advisor – the more you know, the better off you will be. Even a little bit of knowledge will go a long way. Nobody cares about your investments as much as you do so you better know what is going on. Regardless of your debt/investment situation it is critical that make sure that you are familiar with investing basics – at the very least you don’t want to let anyone take advantage of you!

Investment knowledge is important regardless of your financial situation.

I’m still paying off my debts but I would like to start investing for retirement as well.

If you feel you have a good handle on your debt repayment plan, especially if your debt load is getting light, then it might be an idea to start saving for retirement as well. The problem is that if you have been really, really focussed on wiping out your debt then you might not know anything about investments and how to get started. You need to start learning about investments now.

I’ve paid off my debts and I now want to start investing – the problem is that I don’t know where to start.

First of all – don’t panic or make any quick decisions. Continue to save as much money as you can and just keep it in a high-interest bank account. Once you figure what to do then you can start your investment plan. There is no rush! The most important thing to do at this stage is to start learning about investments now! Books, blogs, friends, relatives – learn as much as you can.

I’m working very hard on paying off my debts and I think the idea of investing while I have debts is really dumb!

In that case, keep going with the debts – nothing wrong with that strategy! However, while you are beating down the debt monster – how about spending a little bit of time learning about the next step of investing? Even if you are years away from making your first investment then do yourself a favor and spend a little bit of time each week to learn more about the next phase of your financial life.

Remember: Knowledge = power.



Author

By , on Oct 9, 2008
ABC is the blogger at ABCs of Investing - a new site for novice investors which offers two short and simple investing posts per week. Feel free to subscribe to the feed.

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{7 Comments}

  1. Great information! I have been thinking about talking to a finacial planner. I feel a little bit more informed. I especially like the advice to learn slowly! When it comes to money it feels like its all or nothing, you really gave us in between folks some strong and stable useful information. Another site that has helpful money info is http://pic.tv/. They are doing a 3 story series on getting out of debt, which may be helpful to people coming here that might not be ready to commit! Anyhoo thanks for the great info! I will be back soon to read more!

  2. BSCC:

    I think the key thing here is knowing that investing money needs to be a priority to produce future income. Whether you’re on a hard-core budget or just casually monitoring your spending, it’s a necessity to look in the future and ask yourself, “How am I going to life comfortably after I retire?” Good post!

  3. JW:

    I like the advice to start learning about investing even before you are ready to do it. In fact, I used to pick up personal finance magazines when I barely had enough money to buy them (sometimes I just read them at the college library). When my friends asked what I was doing I told them I was learning about money so I would know what to do with it when I had some!

  4. Marci:

    Good advice for those wanting to start getting their feet wet in investing. Or those just wanting to research it right now while waiting for the right financial time.

  5. Meg:

    What a good idea – learn a little bit at a time to get ready.

  6. Greg:

    Debt
    Pay off debt as quickly as possible. Most debt costs more than the return on any investment. 10% per year is considered a solid return on investment. Most consumer debt costs 12% to 18% per year.

    Investment
    The benchmark is Treasury Bills. They are risk-free. Any investment that has risk must pay more.

    Invest in a index fund (S%P 500 or Dow Jones). Read http://www.reuters.com/article.....9820070507 for Warren Buffet’s take or read The Motley Fool. You can get a fund that has a low cost, no commission or maintenance fees, and gets a better return than the vast amount of managed funds in the market.

    Invest regularly. By investing a set amount on a regular basis, your investments are not affected by the ups and downs in the market.

    Do not invest in anything you do not understand.

    Do not “play the stock market.” That is gambling. Go to Vegas instead.

    Read http://www.fool.com/mutualfund.....urce=InvAg

  7. Thanks for the link and the post Lynnae! I have added the ABCs of Investing to my feed reader and look forward to learning more about investing, as we get closer to being out of debt.

    Hope the settling in to the new house is still going well!

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