Who knows, they could be yours too! Everyone’s situation is different and no one’s is simple. Unless you inherited lots of money or grew up with rich parents who funded your first car, degree, and house, then probably you’ve also had to go majorly into debt just to try to get ahead.
There isn’t going to be an easy way out, but let me remind you of what I’m doing.
My short-term goal: investing for cashflow: to have my investments make enough money on their own so that I don’t have to contribute so regularly to them. In other words, I want my investments on AUTOMATIC REINVESTMENT to such an extent that they begin to SNOWBALL in ever quicker fashion while I’m busy doing my schoolwork and attending to my career.
Although I could be paying off a lot of student debt with any extra money I have, the fact is that that debt is not costing me anything right now. It will be better to invest for cashflow in dividend-growth stocks so that I have at least some chance of coming out ahead in the long run, hopefully sooner rather than later. That’s why I’m trying to aggressively invest at this stage of the game. I’m still just in my early thirties, so now is the time to get working.
My recommendations:
(1) Number one is definitely to get yourself enrolled in some DRIPs, aka Dividend Reinvestment Plans.
(2) Number two is to use a cash trading account to buy dividend-payers that can accumulate on their own into your emergency fund. You’ll be “killing two birds with one stone” if you follow the method I suggest.
(3) Number three is to only use credit cards for online purchases and purchases in places that don’t take cash. Pay the balance off right away. The only excuse for not paying it off right away is when you’re using it as an emergency fund.
If you’re on a steady paycheck, then by all means you should be automating as much of this as possible. If you’re a student or living off of scholarships, TA money, etc. which is sporadic (and not a long-term contract), then I wouldn’t advise automated debits. There are too many unforseeables while you’re in college to do this.
It’s not rocket science, but I think these are going to be the best ways to propel yourself ahead financially. I especially advocate option number one, especially for students and those starting out with small incomes, for other reasons that I’ve outlined previously. That said, there are some good reasons why you should be in DRIPs no matter what age or stage you’re at. And if you’re Canadian, here’s my list of the top ten Canadian DRIPs (some of them allow American investors too). It’s a good entry point if you’re new to DRIPs and you want to get in with some reputable names.
If you want to get into the American DRIP market, read my post about it here. There are going to be some really good buys now with the economy going the way it is.
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Number three is the real key I guess :)
Most of the times people spend more than they should with credit cards. I am very careful about it since I realized it the hard way. Now days I hardly use a credit card.
Thanks
Getting out of debt, establishing an emergency fund and beginning to invest are crucial steps to achieving financial success.