For those that are just starting out and looking for the best way to make their money grow, learning how to save money is the best investment strategy for most people. While saving money is often looked upon as the ugly duckling of the personal financial world and arguably the
the best low risk, high return investment that you can make, setting up a plan to put it in motion can be difficult for many. Here is a beginners guide to
ugly duckling investing for those that want to take advantage of this investment strategy.
There are a couple of basics that already need to be established to undertake this investment strategy. You need to at least know what you are currently spending (ie - have
a basic budget) as this will allow you to look for areas where your current expenses can be cut to save money. You also need to realize that
cutting expenses doesn't equal saving money.
Step One - Set Aside A Set Amount Of Time: The first step is to set aside a specific amount of time that you will dedicate to this investment strategy. While it may take more time in the beginning while you are getting used to your new habits, it will still take much less time than trying to learn a completely new investment strategy. If you can set aside 2 to 3 hours a week, you'll have plenty of time to maximize the ugly duckling investment strategy to the fullest.
Step Two - Reduce Your Current Spending by $100 A Month: With the time you've set aside in step one, the next step for the basic ugly duckling investment plan is to find through saving money $100 a month to invest. While most people assume that doing this requires sacrifice and suffering, the vast majority of people can accomplish this easily through
painless saving methods. There are a wide variety of steps you can take to accomplish this and simply visiting a site like this or one that is similar should give you plenty of ideas on how to accomplish this.
Step Three - Pay Off Debts: The third part is to take the money that has been saved and put it to work for you. Because the main focus of your time for ugly duckling investing is to find ways to save money, the investment vehicle should take little time. If you still have debts, the $100 should go to paying these off because these are
guaranteed returns with no risk or effort on your part. $100 toward an 18% interest credit card is an instant $18% return on your investment. Once all your credit card, car payments, student loans, mortgage and any other debt is paid off, you can move onto step 3.
Step Four - Open A S&P 500 Index Fund: In keeping with the same theme that your time should be spent on thinking of ways to save money rather than where to invest it, once all your debts are paid off, you should place any money you save into a low fee long-term investment. A S&P 500 index fund fits this long term strategy quite well.
Step Five - Continue To Find Ways To Save: While finding a way to save an extra $100 a month should be your initial goal, it's just the beginning. Like with all investments you make, you want to maximize the return on the investment to the greatest possible amount that the time you have will allow. Make sure to use the time you set aside in step one to continue to search for new ways that you can save money on your current spending and place that money toward your debt or in your S&P 500 Index Fund.
Your ugly duckling investment strategy should continue until you are able to build a fund of about $50,000 in your S&P 500 index fund. Once you have reached this point, you will begin to take some of your time to learn how to diversify your investment money while continuing with the ugly duckling investment strategy. This is a basic strategy and can be tweaked so that it best fits your financial goals, but should produce much greater long term returns than spending all your time trying to figure out the best place to put the money you currently have.
Basic 5 Step Ugly Duckling Investment Guide
