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The
first step you must consider before making any investment is
your tolerance for risk. This is important because stocks
can move horizontally as well as vertically at any given
time. If the thought of your investments losing value is
scary to you consider yourself a ‘Low Risk' taker. If you
are open to greater risks in order to potentially achieve
higher financial gains then consider yourself in the ‘High
Risk' category. In addition, factor into your risk level
your timing for investments, your age and long-term goals.
How you
will invest is another consideration. Will you be making all
of your investment choices or will you enlist the help of a
stock broker? Plus, you'll need to consider how you will
continue to fund the stock investments you are looking to
begin. Let alone determining if you will invest in stocks
only, commodities, mutual funds, bonds....I'm sure you get
the picture. At any rate, it is to your advantage to learn
as much about investing in the stock market before putting
in a dime. Remember, you're in this for the long haul.
One
source of good information can be found online at the Motley
Fool (www.fool.com).
While there are a variety of investing websites available
the Motley Fool is all about investment education.
Information on the basics of investing is free. If you want
more advance information they offer a paid subscription as
well. One note of caution is don't get caught up by the
sites advertising. They have to pay for their free education
tools some how. Once you are ready to begin putting money
into the market consider using a Financial Professional, for
a period of time, to review your investment choices and
ensure you are on the right track. Most will not charge you
for this, but may be able to also provide some other
services that can enhance your overall financial portfolio.
These steps should help to provide a solid foundation for
you future financial success.
Stay
bullish on investing,
~Yvon
Dear
Yvon:
My son
just experienced another financial 'disaster' with his
checking account. My wife and I are trying to 'bail' him out
once more. My wife is suggesting that we close out his
checking account, but he's away at school. How can we help
him to avoid any more ’disasters’? ~
Dumbfounded Dad
Dear
D-Dad:
Ouch!
I empathize with your financial pinch. While your wife’s
suggestion may appear to be practical I wouldn’t advise it.
Instead seize this opportunity as a ‘teachable moment’ for
your son to learn about financial responsibility. His
reaching out for help is the perfect open door to do so.
If you are choosing to ‘bail’ your son out then the help
should come with conditions. At the very least it should
include his commitment to timely balancing of his checking
account, establishing a spending plan to account for all
purchases, and accountability to you, for a period of time,
to provide oversight that he is staying on track with his
spending. You may also want to consider putting the agreed
upon terms of your help in writing. Any variance on his part
from the conditions you’ve agreed upon should then come with
the consequence of weathering a next financial disaster on
his own.
As a
word of caution: be sure that the conditions are reasonable,
fair and doable for all involved. Otherwise you could
establish resentment in your son with the avoidance of
including you in future financial decisions. Decisions that
may have the potential to lead to a more unfavorable outcome
than what’s at hand presently.
These
types of lessons are painful, but they can be navigated to
become future success stories.
~Yvon
Dear
Yvon
–
Please
settle a dispute between my wife and me. What is the
difference between a 'major' vs. a 'minor' purchase? I say
there's no difference, but my wife insists that it's based
on how much the purchase costs.
Wanna Be
Right, Atlanta, GA
Dear Wanna Be –
First off, let me assure you there is definitely a
difference between a 'major' vs. a 'minor' purchase. The
biggest difference between major and minor purchases should
not be based solely on how much the purchase costs, but
rather where the money to pay for it will come from. In my
opinion, any purchase that requires funding from a long term
savings vehicles, such as investments or emergency funds,
should be considered a major purchase. Before making any
major purchase requiring this method of funding review your
long-term financial goals. If the purchase is inconsistent
with your goals delay it until financial resources are more
readily available to proceed.
Minor purchases, generally, can be made with cash funds that
are more readily available. An example of this type of
capital includes take-home pay, cash on hand reserves or an
anticipated bonus. To ensure that your purchase offers the
best returns for your money analyze the transaction against
your spending plan prior to making the purchase. Doing so
could reveal that the financial resources in question could
better be utilized in other areas impacting your total
financial goals.
So in essence, you can both be right, when you closely
examine all aspects of your future purchases against your
stated financial goals.
~ Yvon
Ask Yvon
is a production of Focus on Finance, LLC – 513-383-0427. All
rights reserved. Submissions for the “Ask Yvon” column can
be done online at
www.AskYvon.com or in writing at Ask Yvon c/o Focus on
finance, 3189 Princeton Rd #201, Hamilton, ON.
There
are no warranties, expressed or implied, as to the accuracy
and/or completeness of the information posted in this column
or any referenced material. Readers are strongly urged to
consult with a qualified legal or tax advisor to analyze
your specific financial situation.
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