Step 2.Privedite to clean up your finances

Step 2.Privedite to clean up your finances
"The difference between the interest rate on private loans and federal funds rate has increased dramatically in 80 years. Creditors wiser. They realized that many Americans do not have a view about what" interest rate ", or that mathematics, which they taught in high school, is totally useless in the financial world. Market research credit has proven one unexpected conclusion: people are absolutely not interested in their money. "
Do you have a few dollarsthat you're not going to spend on urgent needs and meditate on how to dispose of porazumnee their money. You might even have ran a little ahead and read about how to choose a broker to carry out their first purchase on the stock market ...
Do not be so hurry. Believe me, when it comes to investing money earned from such work, you must obey the signs that restrict speed. Your personal finances should be in perfect order before you even think about placing my first order to buy shares. You will see, that we do not have time to draw your attention to this important principle - never in a hurry.
Get rid of credit card debt
First stop. What is the value you get through this month? You pay in cash or by credit card? One of the key principles of investing is: invest only money that is free of other commitments. That is, if you have a negative balance on a credit card, your money is not free! Here's why: on many credit cards are charged an annual percentage of the outstanding amount of 16% -21%. So, imagine that you set aside $ 5,000 to invest in stocks, but debt on your credit card is the same $ 5,000 and the interest rate on that debt - 18%. This means that you must earn the 18% rate of return after tax (or about 24% before tax) only, not to stay at a loss for the year. Must warn you that chance to earn 24% profit on the stock market a little.
Credit card debt is perhaps the most common response to the question: "Why I can not even begin to make a fortune?" In the United States is circulating about a billion kinds of credit cards, and every man, woman or even child to an average of about four. And about 70% of credit card holders have a negative balance on them every month. Even if the conditions for payment of the debt the most favorable (that is, typically 2% of the debt in the year, or $ 10, depending on whether the sum is greater), even for payment of arrears of $ 1000 at the rate of annual 18% you will need a little more 19 years, during which you pay about $ 1,900 in interest on $ 1,000
We strongly advise you not to go to the third step of this course until they stop allowing credit institutions to feed in your account.
Regular savings plan
Next stop. How much do you regularly set aside for the future itself? In other words, if you set yourself a specific percentage, which put off to the side of each amount you receive? Or do you simply add up, "the treasury" funds, which for some reason were not wasted? Or worse - you discover that you have nothing to defer?
If you answered yes to at least one of the last two questions, you are not yet ready for the next step. It's time to figure out why you're not doing a regular savings or can not do them. An experienced investor will not invest money intended for their own dinners, or paying the rent for the next month or to pay off credit card debt. We recommend to invest only money you have earned (or received as a gift - this is also considered), and wisely saved. As we noted earlier, this money should be free of obligations.
It is reasonable to set yourself a limit of savings at 10% of annual income. You may find it more convenient to save 5%. Others will be able to save 15% per year. In any case, the most important - is to define a regular "rhythm" of savings and stick to it, even if it takes some time to live more economically than current tools allow. You should also have at its disposal sufficient funds to spend from three to six months, without resorting to emergency measures, and those funds should be based on the current account or stored in another accessible location.
If you are already doing regular laying of money, you should explore all possibilities for reducing taxes on the amounts we save - it may be the program of IRA, or SEP, or Keogh, or 401 (k) or 403 (b). Because the money invested in the pension insurance program are not taxed as long as you do not start their spending, they are growing exponentially compared to those tools that you try to accumulate in the investment account. Moreover, some employers now add to your savings plan 401 (k) additional resources designed to increase your profits. Make sure you make maximum use of all of these opportunities and have invested much of their savings in these extremely useful tools. And remember: do not be lazy to make savings, and then you yourself are grateful for it.
Learn everything you can about the rest of your finances
We can not give you advice, what kind of amount, free of obligations, you should save up for the start of investment activities. Our goal is to help you get the money as much profit. So before you ventured to the first investment of money in securities, you should take care of some other financial aspects of your life, such as investing in the future education of their children, insurance, buying a house, work in the future, your bank and your car.
In conclusion, summarize only the main result: tidy your finances, and only then proceed to the next step towards a successful investment.