There are all kinds of ideas floating around out there in the financial world. Some of them are frankly lame brained. Others have merit in certain situations, and still others are a good idea for just about everybody. Sorting out which ideas are which can be trying, but it’s well worth the effort to educate yourself. Should you open up a passbook savings account or a high yield savings account? Invest in CDs? Mutual funds? Real estate? It really depends on who you are, what your goals are, and what kind of assets you’re working with.
Regardless of where you are financially, though, there are some things that are simply a good idea. These include:
- Get the highest interest rate you can out of your long term savings. A high yield savings account is a good option if you need to have access to your money in case of an emergency but still want a decent rate of return.
- Only leave enough money in a savings account to handle emergencies. For most people, keeping more than six months’ income in a savings account is a bad idea. Your money can work for you much better in other venues.
- Regardless of the type of accounts you have, make sure that your financial institution compounds your interest daily. Even with today’s lethargic interest rates, you will come out ahead if your bank calculates and compounds your interest daily. Otherwise, banks often calculate your interest based on the lowest balance of the month.
- Educate yourself about anything you invest in. This is good advice whether you are investing in mutual funds, real estate, or anything else. It’s better to take your time and know what you’re getting into that to simply put your money into the hands of an “expert” (most of who don’t know much more than you do) and hope that all goes well.
- Avoid losing money. High risk investments can look attractive, with the lure of enormous potential. Most investors find, however, that in the long haul, you end up ahead by putting your money into safer financial vehicles. Warren Buffett is known to say, “Never lose money.” While we consider that somewhat unrealistic, you’re usually better off sticking with low risk investments.