Retirement Planning – The First Three Steps
The Dynamic Wealth Report
April 24, 2009
My First Stock Purchase
I remember this event clearly… like it was yesterday. A number
of years ago, I was sitting in my apartment in San Francisco. The fog
had started rolling in, and the sunlight was slowly starting to fade… it
was another San Francisco afternoon.
My apartment was one of four on a sleepy corner of Noe Valley.
The second floor walk up was painted white. The living room was large
and the kitchen had recently been renovated to a modern level. So modern
it clashed with the rest of the 70 year old house.
I sat in the living room and talked eagerly with my friend Melissa.
She’s a sweet girl. Her main job is working with large donors to a well
known charity organization. I know she works tirelessly drumming up
donations large and small. Her drive was amazing. Every dollar she
brought in went to helping someone in need.
Her heart is big, always donating her time, energy, and money to helping
others. Now it was my turn to help her. She’d come to me looking for
answers.
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Melissa was in her late 20s, and she wanted to start planning for
retirement. She also wanted to start saving for some of her long term
objectives. But, she didn’t know where to start.
As you know, I’m not a financial planner or CPA. But what I do have is a
good dose of common sense. That, a great deal of experience, and
knowledge when it comes to investing. I gave Melissa three bits of
advice to start her on the journey towards financial freedom.
First, I told her to live within her means.
This is the biggest part of long term planning most people struggle
with. Many spend more than they make. To survive they need to take on
debt… which adds another layer of expense. The cycle repeats itself over
and over again… driving consumers deeper in debt.
The key to living within your means is knowing what your income is, and
thinking about it a little differently. Look at every purchase you want
to make, and realize you are trading working hours for that item. Is
buying that new pair of shoes worth working another six hours? Is the
exotic vacation you’ve planned worth working for three weeks straight?
The second thing I told Melissa was pay off her debt and start saving.
Having a lot of personal or credit card debt is like trying to swim
across Lake Michigan while holding a 50 pound rock. It can be done, but
it’s not very fun.
Most people never realize the amount of money they hand over to the
banks and credit card companies. Make your payments, and make them on
time. Every little bit helps. If you have credit card debt, first stop
using the card. Then start paying as much as you can to get rid of the
debt. Every dollar counts. Even if you’re only adding $5 or $10 dollars
to your payment every month… do it. In the long run, it will save you
money.
Once your debts are paid off, you can start putting money into a savings
account. That leads to my third bit of advice.
Once you’ve saved a bit of money, start investing.
I’ll be the first to admit, figuring out how to invest your hard earned
dollars can be a bit difficult. The options can be daunting. And if
you’ve never done it before, it can be a bit frightening. There is a bit
of advice that I passed along. I wish I can claim it as my own, but I
actually heard it first from Peter Lynch.
The advice is as good as it is simple. Invest in what you know… and stay
away from what you don’t know. (I paraphrased of course, but good advice
nonetheless.)
Just the other day, I got an email from Melissa.
The subject line was titled (appropriately enough) “My first stock
purchase”. I am happy to report she is now on her way towards financial
freedom.
• Life Time Fitness (LTM) was upgraded by Stifel
Nicolaus to a “Buy” rating. The stock was given a price target of $22.
• Chipotle (CMG) was downgraded by Wachovia to an
“Underperform” rating. The fast serve, good food concept seems to be on a
bit of a rebound so the rating is a bit puzzling.
• Piper Jaffray recently initiated coverage on a number of
tele-communications companies including Verizon (VZ) and
AT&T (T).
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