Nate's Secrets to Financial Success #2

Sorry, I've been a little awol lately dealing with finals and our recent trip to Denver to find a place to live. We ended up finding a really nice apartment that is right next to Northrop Grumman. It will literally be a 3 minute walk to work. We're happy about not having to buy another car or deal with the daily commute.

I also finished my last final yesterday, so I'm home free to graduate! Graduation is on Thursday and Friday of this week, so I'm pretty pumped. I have to go pick up my cap and gown today. I might just wear it all day tomorrow, Thursday, and Friday. We'll see.

So I'm glad that people seemed to agree with my first secret to financial success, and that I was able to give out a couple more budgets. You know, living within your means includes saving what you didn't spend that month. I recommend saving a bare minimum of 10% of your income every month. Now, what do you do with this extra cash? You could stash it under the mattress, and when you go and grab it in 20 years, it will still be there, faithful as ever. Or, if you're smart, you can make it magically multiply.

#2 - Invest Wisely

It's been said that compound interest is the 8th wonder of the world. Einstein said "The most powerful force in the universe is compound interest." And that guy knew a little about powerful forces. Let's do a little illustration to show why compound interest is so powerful. From 1926 to 1999, the average annual return in the U.S. stock market was roughly 11%. Let's say you make $2000 every month, and save $200 for long term needs. After 30 years of doing this, without investing in anything, you would have $72,000. If you invested this money every month into the stock market, getting a less than average return of 9% per year, you would have $366,148.70 at the end of the 30 years. Yeah, that's pretty powerful.

Most people want to invest, but don't know how or what to invest in. Here's a secret for you...


#2b - Invest in what you know

Peter Lynch, the famous former manager of one of the most successful mutual funds ever, Fidelity's "Magellan" Fund, agrees with this statement. In fact, he was the one who said it.

For example, do you like skateboarding? Is there a type of skateboarding equipment that you really love and consider to be the best? Chances are there are reasons you think that way, and chances are that other people will begin to think the same way. Invest in that company!

Are you a foodie? Ever considered investing in your favorite brand of cookware or pots and pans? It's great; You find a company you really like, give them a little money to help them make more stuff you really like, and then they give you your money back, with a little extra on top!

Note that there is risk in any investment, and you will see higher returns from riskier investments. If the money you are wanting to invest is something you will need in the short term, I would recommend investing in something stable like CD's, money market funds, or even bonds and treasuries. It's good to have atleast 3 months worth of income set aside where you can get to it easily. This money you should definitely invest very conservatively.

If you're a really timid investor like me, start out with the really safe investments, and then do a lot of research. Go out and get a mutual fund that someone else manages, or an index fund, that will rise and fall with the stock market as a whole. You just put it there and basically forget about it. 20 years from now, barring some kind of government collapse, you'll have more there than just what you put in.....probably a lot more.

The point is, if you love something, invest in it! Chances are other people love it too.

So get out there and invest your extra cash, but do it wisely. If it sounds too good to be true, it probably is. Oh, and by the way, if anyone is interested, I've found a way to double your money in less than a year by investing in offshore mining. So just give me a call or send me a check and we'll both be rich in no time.....or atleast one of us will.


It's all about the Washington's baby....