Assume for a moment that all the good points of every investment could be combined into one perfect security. Here is what it would do for you.

1. It would be safe in the sense that it would return a dollar for each dollar invested.

2. It would also be safe in the sense that it would not shrink in purchasing power as a result of inflation. Its value in dollars would increase along with other prices.

3. It would give a satisfactory percentage yield.

4. The yield would start at once at a satisfactory level – not be artificially set up to start at zero and increase over the years in such a way as to penalize early liquidation.

5. The yield would continue indefinitely or for the life of the investment.

6. There would be no selling charge or other expense for making or holding the investment.

7. The investment would be liquid – that is, convertible into its original dollar value on short notice.

8. Money could be invested in a lump sum or periodically in smaller amounts, but in the latter case there would be no penalty or loss if such payments were discontinued.

9. The investment would offer a chance for long-term appreciation and participation in growth.

Naturally no investment can have all those qualities. Every investment, no matter how good, has two or three drawbacks that affect its advantages. There are no “perfect” investments.

Many people when they think of investing only view the end game… and that is to have money. An investing purpose will make the process, steps and focus much more defined and help “push” you towards the final goal. I know it has made the process of regular investing much easier in our family.

To determine your own particular needs, look at the list of questions below. They will help you focus on your own objectives.

• Do you want complete safety of your dollars, so that you can be sure of getting them back, or are you willing to take some risk? Remember NO risk = Low return
• Can you spare the money for a period of years, or do you want it readily available because you might need it at any time?
• Do you want the income from the investment to start now, or are you willing to settle for the possibility of a larger profit in the future?
• Is it to be a reserve against financial trouble or loss of job? (Emergency Fund)
• Is it for protection against inflation and loss of purchasing power?
• Is it eventually to provide income when retirement comes?
• Is it for future use in purchasing a home or business, or for some other undertaking?

Most families have several of those objectives. Therefore, in general, they should have several types of investment. And by combining one type of investment with another, a family should be able to achieve any reasonable financial goal.

Business conditions and your own finances are always in changing. A good place today for your money may be a bad place tomorrow. So the wise money manager makes regular comparisons pitting one investment against another. Our purpose over the next few articles offer some suggested standards by which you can make comparisons and judge what particular investments are best for your purpose at any given time, and why.

Always remember, there is no one type of foolproof investment suitable for all purposes. Investments are just like clothes. The kind you buy to wear in the Alaska winter are not the kind you buy for a summer trip to Florida. Acquiring a speculative stock in the face of business uncertainty is like putting on a bathing suit when it is threatening to snow. Buying a low-interest bond during an inflation is like wearing an overcoat on a balmy day in June. You probably don’t need that much protection. To carry the example a little further, if your own personal circumstances are such that you can barely afford to buy clothes for office wear, you would not be smart to splurge on a tuxedo.

Thus, the first thing that you, as an investor, must do is get clearly in mind the job you want each particular investment to perform. If you want it to protect the family in case the breadwinner dies, that is one thing. If you want it to work for you over the years and are willing to take some risk and all investments require some risk, that’s another thing. And there is not much overlapping. One investment usually does one job, sometimes two, but rarely more.

The more “risk” taken usually the greater the return.

To invest you must HAVE money, to get that money most people have to learn to save. Saving means the building up of a cash fund which can be spent or invested. In broad terms, the growth in cash value in a life insurance policy or a decrease in the amount of the mortgage on your home are also savings. But for our purposes, let’s define saving to mean accumulating cash or the equivalent.

Saving is not easy, sexy or much fun. Despite what people say, there is basically only one way to do it: hold down your outgo and keep up your income. There are, however, a few tricks to make the job of savings less of a chore and a little more intriguing. Here are half a dozen of the most common.

The Marked Money Method

This method is one of the oldest known to man and is simply a piggy bank (jar) with a rule book built in. Pick a coin, anything from a penny to a half dollar. Say you decide on quarters; from then on, quarters are unspendable. Every quarter you get goes into the jar. Keep this up for a little while and it easily becomes a habit. And you’d be surprised at how quickly small-change savings can mount.

Today people use less cash and spend more with a debit card. Companies like Bank of America have a program called “Save the Change” where the change from a purchase goes into a saving account. In our house we never spend change always dollar bills and save about $60 per month is loose change for savings.

The Short-Cake Method

The short-take method is based on the theory that anyone can sacrifice for a week or two at a time. Just about anyone can manage for short period of a few months you could not stand indefinitely. Many people and families have successfully used the technique for a brief period, say three months, and just save like crazy. They’ll cut expenses to the bone, knowing that the end is always in sight, and stack up away a nice chunk of cash. When it’s over, they celebration and resume their mismanaged living (but with cash in the bank) until they feel strong enough for a repeat the process.

The Windfall Method

The windfall method is where the circumstances have to be just right. Every once in a while you may “find” some money. Perhaps you get a raise, or finish paying off a debt. Perhaps the doctor orders you to quit smoking, or the computer breaks and you cancel your monthly cable bill. Wherever it comes from, there’s suddenly “extra money” without a name on it. Grab it quick, or a large portion of it to put into savings, before it gets absorbed by living expenses. You survived without it before, and you can continue to.

NOTE: This works great in paying down debt using what is called the debt snowball.

The Even Swap Method

The even-swap method requires focus and determination. Pick one specific regular expense. Trade it in for savings money. Make it a sacrificial lamb and deposit its cost in the bank each month. This is a bit easier than more general kinds of budget-cutting because the dramatic twist helps focus. For example… Managing a reduction in the entertainment budget, for some mysterious reason, is generally more difficult than banking the price of the midweek movie in a jar as you settle down to a quiet evening at home.

The Self-Service Method

The self-service method calls for “finding” a job you currently pay other people to do you could do yourself. House cleaning? Lawn mowing? Home repair work? Do it yourself and bank the saving.

The Elbow Grease Method

The elbow-grease method simply means save more by earning more. It’s not as hard as it sounds. If your goals are modest enough, say $300 or $500 a month, there are plenty of opportunities for a little part-time income. For example, delivering pizza, parking cars on weekends, baby-sitting for neighbors. Look around. If you can spare a couple of days or evenings a week, there may well be a way to cash them in.

None of these tricks contains any magic. But any one or another of your own imagination – might prove a shot in the arm to make the flesh as willing as the spirit.

One of the “rules” of investing is to diversify – spread the risk. No matter where you invest and there are other options besides stocks, following a process will help you and your family achieve financial success and independence. Here is the order:

Manage your money. Know where the stuff goes and control its flow. We use a budget.

Get out of all debt except the house. The money being paid on debt will now be free to invest.

Protect against catastrophe. Have the right kind of life insurance and an emergency fund in a safe place. We recommend 3-6 months of living expenses.

Own your own home – or have convincing reasons for renting. Anyway, know both sides of the question. This means not over buying, putting down a good down payment – 25% of your take home pay as a monthly payment.

Never invest in anything you do not understand and cannot explain.

Know as much as you can about stocks and the companies you are buying. Stocks can be very rewarding and also a dangerous investment. Investing in stocks give you a piece of a wonderful growing and expanding America and world, something people in other countries would love the opportunity to own.

Know the language of the business and businessman. You’ll need to know it to invest.

Know the techniques of investing in the alternatives to common stocks. They are bonds and preferred stocks and various forms of real estate and mutual funds.

Naturally, all these topics may not interest you. But do not forget. There is a order for success. When it comes to taking action, go slow one step at a time.

Many people claim the want to start investing right away and no time is better than now. But starting to invest before other financial areas are handled often puts a financial strain on the building for the future.

I believe that after a family has come to a point where it they handle money well, and has basic protection (emergency fund) against financial emergencies and has its housing situation under control, it is ready for the world of investing. By this time family has some money coming in above current expenses – it is money which can now be put to work. The stock market may look inviting and perhaps other investments as well such as bonds, real estate, a small business and so on.

Common stocks are perhaps the most intriguing investment. The long-range future of America still appears bright… especially compared to other countries around the world. Yes, the US has some challenges but there is still tremendous opportunity. It is an amazing thing to think that anyone can own a financial share of a major company, merely by buying common stocks. Buying stocks you not only give yourself the chance to pocket some money but also contribute your bit to the development of the new ideas, the new products, the new methods and the new businesses. And these, of course, provide the spark and vigor that moves a free economy forward.

Here is where people soon discover… The opportunity to invest comes with NO instruction manual. You can get tons of advice, but how much of it is good. Remember, for every seller of stock, there must be a buyer. Some would much rather have cash than stock; others think the stock is much more valuable. Both cannot be right.

It is a fact… You will make mistakes. You can reduce them and keep them at a minimum by gaining a working knowledge how money works and business cycles. If the idea of reading and putting in some work to gain a financial education is of no interest to you that is fine. But if you invest in stocks or real estate without being at a minimum an amateur economist and business forecaster be prepared for some losses and rough waters.

You must understand that money is a commodity like wheat or copper or oranges. True it is much more convertible than any of these, it still has an important characteristic of a commodity. The value of money moves up and down. When you don’t have your money invested in stock or real estate or something of that nature, you probably have it invested in dollars down at the bank. And dollars can lose value just like the others.

This is where inflation comes in here. During certain periods money goes down in value and other things go up. In recessions the opposite occurs. Money becomes more valuable while stocks, commodities and real estate decline. These facts must be known and reviewed by those who plan to invest for the long haul. Otherwise they can overload themselves with the wrong investment at the wrong time.

Marriage, like all other relationships, is a constant process of change and growth. One way to grow is through meeting problems and learning how to handle them… the goes with finances. Problem-solving is something that goes on all through life, whether you are conscious of it or not. Youngsters learn something about problem-solving, in a rather formal fashion, through their classroom work in school. They learn a great deal more about it informally when they play with friends, take part in sports, work out their relationships with other members of the family.

But many of us do not consciously and fully accept the responsibilities for solving problems until we are married and have our own family. Then problems must be faced and dealt with or the entire family situation will be in trouble. Some people have an ostrich technique for handling problems. They believe that if they don’t look, the problem will go away. It rarely disappears, but it often changes – for the worse. Others firmly believe they can work things out if they rely on their hunches, and there are a lucky few who have acted on the bright flash of inspiration and all has come out for the best. But it’s not a method on which everybody can count. Most mature persons find they must solve problems the hard way – step-by-step. They must analyze and try out and if one solution does not work, be willing to try out another.

Some problems can be solved only with expert help, but in our day-to-day activities most of us have to be do-it-yourself problem-solvers. Do you have the feeling you don’t know what to do nor where to turn when you face a problem? There are several steps which most experts agree constitute the most effective way of solving problems.

1. The first step is to recognize the problem. Suppose, for example, that you are having trouble on your job. You may go along for weeks without realizing the problem exists. Perhaps you just feel out-of-sorts, and blow up at the family when you get home from work. Or maybe you develop a series of illnesses which are not serious but which give you a comfortable excuse to stay home from work. You finally realize that it is your job that is bothering you, and that you had better do something about it. You are on your way to dealing with the problem. Recognizing your problem, in this situation, means not only admitting that something is wrong with your job, but identifying what that “something” is.

2. The next step is fact-finding. What do you dislike about your work? What would you really like to do? Do you have the ability to do it? Do you have the training? Is that sort of work available in your town? Are you sure enough that it’s what you want to be willing to move? Get together all the information about the problem that you can assemble. That might mean talking to other people, looking critically at yourself, searching in books. When you have done all your fact-finding, take another look at your problem. You might then see it in a new light. For example, it is possible that the job you have doesn’t look so bad after all, once you have found out that nowhere in your town is there a job which makes better use of your training. But if the problem is still there, what should you do?

3. The final step is to find a solution. Make a list of all the possible solutions to your problem: ask to be transferred to another job; go to work for another company; take night courses until you are qualified for a different type of work, etc. Pretend you were acting on each of the possible solutions, and figure out how it would affect you and your problem. Out of all the possible solutions, one will come closest to correcting the problem and will carry with it the least danger of creating new problems. That is your best solution. You arc ready to take action to solve your problem.

We do not mean to suggest that applying a one-two-three formula makes problem-solving simple. But too many of us go around in circles when we face a problem. We can be much more confident of getting results if we approach the problem in an orderly fashion.

It is not always possible for everyone to solve their own problems. Sometimes an individual is so involved in the problem that he cannot see it objectively. Sometimes, in a marriage, the two partners see a problem and its possible solutions from different points of view and need an impartial third person to counsel with them. In such situations, it is not a sign of weakness but rather a sign of strength to seek outside help. It is just as foolish to insist stubbornly on handling your own problems, even if you are getting nowhere with them, as it is to insist on “doctoring” yourself while your health deteriorates. Many communities have social agencies which offer family counseling; trained social workers who are experienced in understanding family problems will guide married couples in finding solutions. Most churches have people on staff, available to discuss family problems with the members of their congregations and to offer advice.

Many approaches that serve you well in managing your money will be useful in managing other aspects of your life and marriage is no different. True, working out the intangible personal give-and-take of marriage cannot be charted on a balance sheet. It is not as precise as that. Yet the principles of money management – self-discipline, self-understanding, shared planning, direction toward long-range goals – are also the principles which help build an enduring marriage.

The techniques of keeping track of where your money goes can also be applied to another very valuable possession – your time. Budgeting your time may not be as common an idea as budgeting your money, but if you do it successfully, you can be spared the remorse of looking back on wasted years.

Review the values for your marriage, it should be clear to you that time is an important ingredient in achieving all of them. A better job, more education, a better understanding of those with whom you share your life – all this takes time.

Budgeting Your Time

It is never too soon to start making wise use of your time. Like using your money wisely, it takes some practice and it should be developed as a habit.

You have little choice about many activities which have a claim on your time. Work takes up a large part of your day. Raising a family can make almost a 24-hour daily claim on your time. You like to have some time to enjoy yourself. Budgeting your time certainly does not mean eliminating recreation – an important element in a well-balanced life. Budgeting time does mean eliminating the dead gaps – the evenings or the week-ends when you had no special plans and thought that maybe you might get started on something, but somehow let time slip by without anything to show.

It means meeting your commitments to yourself. If you have decided you want to spend an evening a week studying or practicing the piano, consider your decision a promise not to be put off by an evening of video games or a session at the bowling alley.

Budgeting your time means each member of the family does not get so absorbed in his own interests that there is no time left for family activities. The man whose job runs into many night meetings or who takes an extra week-end job to pick up extra cash; the woman who gets deeply involved in community activities may be using time in a way that crowds out the essential family goals. Even the over-conscientious home-maker may make this mistake. She can so busy herself scrubbing and cooking and feeding that there is no time and energy left to know and enjoy her family.

Budgeting time means planning time for work and time for play, time for being alone and time for doing things together, time for making today pleasant and productive, and time invested in moving toward tomorrow’s goals.

As you learn to manage the various amounts of money which represent present and future financial security to you, you should, as a good money manager and personal finance master, you will know what your financial position is. It is not enough to say: yes, I’m saving money; yes, I’m covered by insurance. Your financial position is a very specific statement; it is known in financial terms as your net worth.

At the end of each year, you should figure out your own net worth. Then you can measure the changes that have taken place and you will have a realistic picture of whether you are moving toward or away from financial security. You can figure your net worth in exactly the same way any business firm does – by drawing up a balance sheet. What goes into a balance sheet? A list of assets and liabilities – or a list of what you have and what you owe.

The Liabilities

For a do-it-yourself balance sheet, start with your current liabilities. That means your short-term debts – what you owe on things you are buying on installment credit, money owed on credit cards, on cash you have borrowed, etc. Then add to that your fixed liabilities. This is the long-term debt like the mortgage on your home. Add those together – current and fixed – and you will have your total liabilities.

The Assets

Now for the other side of the balance sheet – your assets. Your current assets will include the cash you have on hand and in the bank, plus stock, bonds, mutual funds, the value of your insurance policies and any other securities or notes which can be quickly converted into cash. Your fixed assets will represent the things you own or are in the process of owning – your home, automobile, furniture, appliances and other major items. Estimate and put down the actual present value of these things, even though you are still paying for them. Again, through simple addition of current and fixed, you can arrive at your total assets.

Doing The Net Worth Math

Subtract your total liabilities (what you owe) from your total assets (what you own) and you will have your net worth. If your liabilities add up to more than your assets, your net worth is minus – you had better revise your money management drastically. If your net worth stays the same from year to year you are courting trouble – spending money as fast as you make it. If your net worth shows a nice, steady build-up from year to year, you have mastered the art of money management. But remember it can always be improved!

When it comes to money management one tip to follow is to start your kids off early on learning manage their own money. Often the extra money earned by young boys, and girls, can strengthen family values. The “Why” comes from them understanding how money works and can help reduce the “demands” for things the want and need, when they must pay with their money. What is earned by a teenager through baby-sitting, or mowing lawns rarely becomes a sizable amount of income, but it can make an important contribution by giving the young earner a sense of carrying his share of the load.

There are, of course, some situations – particularly in large families – where it is a real financial relief when the teenagers no longer are supplied with weekly allowances. At the same time, the youngster with an income of his own tends to become somewhat money-conscious. He takes with added seriousness the family deliberations about what should be saved and what to buy and when. He becomes part of the money management team.

Earning extra money need not be a disrupting experience, taking mother away from children or sending father out to “moonlight.” In a more modest way, many families have been able to add to the family income by marketing talents and abilities which they have always thought of as purely for home consumption. In some cases this can be done on a part-time basis, and often the work can be done right in the home.

To suggest only a few such possibilities, one could sell items on eBay, or work as a computer graphic artist or spend a few hours a day doing survey work over the telephone, tutoring, or build websites for local businesses. A man with a flair for shop work can convert a hobby into a money-making activity by repairing furniture or creating other marketable items. It’s only in the rare instance, to be sure, that money-making activities of this sort yield a sizable revenue, but they do provide a way of earning extra income without too much pressure and often with a great deal of pleasure. They can help achieve family needs for extra income without sacrificing family values.