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Before you start investing, you should decide what goals you are trying to achieve. For example, your goal might be to at least have enough money so that you don't have to spend all your time worrying about not having enough money. Once you have financial peace of mind, you can spend your time enjoying life. To achieve this goal you have to make money, save money, and invest money.
Making Money Unless you are fortunate enough to have a rich relative who kicks the bucket and leaves you a fortune, you will probably make most of your money from your career. To make money from your career, you need to pick your career wisely; one that you can be successful at. To be successful at a career, you need to know what you have a natural aptitude for and what you are good at. To find out what your personality and skills would allow you to be good at, check out Do What You Are : Discover the Perfect Career for You Through the Secrets of Personality Type--Revised and Updated Edition Featuring E-careers for the 21st Century and Discover What You're Best At. You should also consider that there are way too many young people nowadays going to college and graduating with high debt burdens and worthless degrees. Before you do that, read Worthless: The Young Person's Indispensable Guide to Choosing the Right Major. Once you've picked a career and are in it, to be successful in many of today's jobs you'll also need good math and writing skills and good organizational habits. If you'd like to improve your math and writing skills, you can start with The Math of Money: Making Mathematical Sense of Your Personal Finances, Merriam-Webster's Guide to Everyday Math : A Home and Business Reference, All the Math You Need to Get Rich: Thinking with Numbers for Financial Success, All the Math You'll Ever Need: A Self-Teaching Guide, Numbers Guide: The Essentials of Business Numeracy, Fifth Edition (The Economist Series), Schaum's Outline of Basic Business Mathematics, 2ed (Schaum's Outline Series), Grammar for Smart People, Modern American Usage: A Guide, Eats, Shoots & Leaves: The Zero Tolerance Approach to Punctuation, The New Shorter Oxford English Dictionary (2 Vol. Set; Thumb Indexed Edition), and Le Mot Juste: A Dictionary of Classical and Foreign Words and Phrases. Two books that can help you become more organized and productive at work are The Organized Executive: A Program for Productivity--New Ways to Manage Time, Paper, People, and the Digital Office and The High-Tech Personal Efficiency Program: Organizing Your Electronic Resources to Maximize Your Time and Efficiency.
Saving Money Next, once you have a regular income coming in from your job, you need to keep your spending below your income. 50 Simple Steps You Can Take To Improve Your Personal Finances: How to Spend Less, Save More, and Make the Most of What You Have, Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence, and Living Well on Practically Nothing: Revised and Updated Edition give you many ways to save money. Much of the information in these books is simple common sense that anyone who saves money knows and uses on a daily basis. The last book mentioned, by Edward Romney, has been especially useful in my life. He shows that living within your means and having a life you like are both possible. For most people, the largest source of spending is the purchase and maintenance of their homes and automobiles. For further advice on saving money here, try The 106 Common Mistakes Homebuyers Make (and How to Avoid Them), The Savvy Woman's Guide to Owning a Home: How to Care for, Improve and Maintain Your Home, Dare to Repair: A Do-it-Herself Guide to Fixing (Almost) Anything in the Home, Insider's Guide to Buying a New or Used Car, and Auto Upkeep: Basic Car Care, Maintenance, and Repair. For a lower-priced house, look for one of the beautiful and well-built older homes in the inner city. See the books Renovating Old Houses: Bringing New Life to Vintage Homes (For Pros By Pros), Bungalow Nation, and The Arts and Crafts Home. The gentrification of the neighborhoods surrounding big city downtowns is a trend that will probably continue. The exodus out of cities in the twentieth century was largely caused by an explosion in urban crime which was in turn caused by new police crime control theories that turned out to be ineffective. These theories have started to be replaced in recent years by better theories with a resulting drop in crime. Cities in the future should be more hospitable again for the middle class. Another reason the middle class may return to the cities: living in the outer suburbs and commuting may become less viable if believers in the peak oil theory like James Howard Kunstler are correct and gas prices skyrocket. Finally, to save money on your home landscaping, see The Landscaping Revolution : Garden With Mother Nature, Not Against Her. No more weekends cutting grass!
Investing Money After you save some money, it's time to start investing. The best investment book for beginners is Fail-Safe Investing: Lifelong Financial Security in 30 Minutes, by Harry Browne. Browne starts from the premise that no one can really predict the future. If anyone did have that talent, they would probably use it to make themselves rich rather than writing books telling other people how to become rich. Instead of listening to purveyors of get rich quick schemes, Browne says you should equally divide the majority of your savings into the four investment areas of cash, bonds, stocks, and gold. Each of these four will do well under a different economic condition. Whatever the circumstances are, at least one of these four investments will go up enough to make up for the others going down, thereby preserving your wealth. Browne then goes on to give detailed information on how to go about doing this. The rest of your savings, which Browne says should be whatever you think you can afford to lose without causing financial distress, you can speculate with. The most popular area for speculation is probably the stock market. If you invest in stocks you'll need to do background research on and analyze the financial statements of various companies. Be careful when you do this; things are not always what they appear. You don't want to invest in the next Enron. See Understanding Financial Statements (9th Edition), Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition, and The Financial Numbers Game: Detecting Creative Accounting Practices. If you are interested in stocks and would like to get an idea how a successful stock investor operates, you might try reading any of the many books about the the world's most successful stock investor, Warren Buffett, like The Essential Buffett: Timeless Principles for the New Economy or Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds. The future, though, may not be a good time to be in the stock market. Several recent books have come out warning that the future may be tough sledding, economywise. The best of these are probably the series of books written by William Bonner and/or Addison Wiggin: Financial Reckoning Day: Surviving the Soft Depression of the 21st Century, Empire of Debt: The Rise of an Epic Financial Crisis (Agora Series), The Demise of the Dollar... and Why It's Great For Your Investments, and Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics. An old adage is that you should hope for the best, but expect the worst. Bonner and Wiggin will give you an idea of what that worst might be by laying out the worst case scenario of what could happen if all the recent negative trends come together to create the perfect economic storm. In addition to being informative, these books are also entertaining to read. Bonner and Wiggin suggest gold as an alternative investment to stocks. For further information, see The ABC's of Gold Investing: Protecting Your Wealth Through Private Gold Ownership and The Coming Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets. Gold has always been the ultimate safe store of value. Buying gold is a little like betting that the government is going to continue to follow inflationary policies. Most goldbugs subscribe to the Austrian theory of economics. A recent bestseller using Austrian analysis is Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. If you study Austrian economics, you'll understand better why the current attempts by the government to take over and reallocate resources to bring back prosperity won't work in the long run. Another popular area of speculation in recent years has been buying property. Books such as The Coming Crash in the Housing Market : 10 Things You Can Do Now to Protect Your Most Valuable Investment and Sell Now!: The End of the Housing Bubble spent several years issuing Cassandra cries against doing this. If you do decide to buy property as an investment, you might want to consider buying it in the Midwest or Northeast. James Howard Kunstler predicts in The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century that future energy and water shortages will make the Southwest and Western United States a less desirable place to live in coming years. Reading Kunstler, you can hear a point of view not often heard in the mainstream media. If you find Kunstler's pessimism simpatico like I do, another book along the same lines is The Party's Over: Oil, War and the Fate of Industrial Societies. Finally, since You Can't Take It with You [VHS], you need to figure out how to plan your retirement so that you'll have just enough money to live on- no more and no less. See Die Broke: A Radical Four-Part Financial Plan, by Stephen Pollan. Pollan's philosophy: don't expect your company loyalty to protect you in times of downsizing and layoffs and always be prepared to look for another job, melt your credit cards and pay cash, don't bet on social security or your pension still being there when you retire and consider working past 65 as previous generations did, and spend money now on your family while you're still here instead of leaving it to them when you're not. His book expands on how to put this philosophy into action.
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Mark Gaines (Indianapolis, IN USA)
Qualifications: a financial beginner