Do Business Well

By now you’re an old pro at this money thing. Just keep managing your existing investments, and transfer your accumulating savings balance to these or new investments as you see fit. If you paid attention, you saw that I followed a few simple guidelines for this strategy.

Use Your Savings Account as a Staging Area

In other words, use it to store your accumulating weekly contributions until you have a balance large enough to transfer to a higher-yielding investment. If you keep all your savings in a regular savings account, you’re missing out on better opportunities.

Work With a Safety Net

Your CD account is guaranteed—you can’t lose money. It’s also insured; if the bank goes out of business, its insurers will cover your investment. In other words, you can’t lose. Even if you make risky investments in mutual funds, stocks, or Antarctic real estate and lose every penny, you’ll still have that CD to help you get back on your feet.

Keep a Reserve

The money accumulating in your savings account is your “reserve supply,” just in case something bad happens and you need some cash. For example, if youlose your job you’ll have some cash in your savings to cover bills that will still be coming in till you find another job. As your bills grow, so should your reserve. People who live on their own try to keep at least one month’s income in their savings as a minimum. Two month’s worth is better, and three is ideal. Until you move out on your own, you should be safe with the above plan.

Don’t Put All Your Eggs in One Basket

In money talk, that’s called diversifying your assets. If all your savings are in a single mutual fund and that fund’s value crashes, you’ll lose big-time. Spread things out so that a potential loss in one investment can be offset by the success in other investments.

Don’t Cash Out

The moment you make a withdrawal to spend an investment, you stop getting richer and start getting poorer. When you make a withdrawal or sell an asset, roll the money into another investment—immediately. Every day that it sits in a checking account or your wallet is a day wasted. Keep it working. Unlike the rest of us, money doesn’t need a day off. Keep it working seven days a week, every day of the year. That’s also true for the interest and dividends you make in your investments. When you’re starting out, these bonuses don’t seem like much, but when you add them together and keep reinvesting them, they make a big difference over time. Keep every penny on the job, full-time.

Never Stop Saving

It takes real discipline to save up stacks of cash. You’ve got to save more, spend less, and get better and better at those skills all the time. Once you’ve mastered these habits, it would be a shame to relapse into your old ways. Habits are much easier to maintain than they are to start. Each time you attain a financial goal, don’t treat it as the finish line. Use it as a milestone to celebrate how far you’ve come. Then set the next goal and continue your journey.

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