Beginner’s Guide to Saving and Investing

Help your money grow with smart savings and investment strategies.

Saving money anchors your financial stability. Without savings and investing, you’re essentially living on uncertain ground. One health emergency, unexpected expense or change in your employment could leave you in dire straits if you don’t have savings to fall back on. In this webinar we will tell you how to start and maintain savings accounts, funds and investment vehicles. We strive to demystify terms and provide you with a good understanding of what steps you need to take to accomplish your savings goals.

The Beginners Guide to Saving and Investing

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Your “savings” are usually put into the safest places, or products, that allow you access to your money at any time. Savings products include savings accounts, checking accounts, and certificates of deposit. Some deposits in these products may be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, but there’s a tradeoff for security and ready availability. Your money is paid a low wage as it works for you. After paying off credit cards or other high interest debt, most smart investors put enough money in a savings product to cover an emergency, like sudden unemployment. Some make sure they have up to six months of their income in savings so that they know it will absolutely be there for them when they need it, but how “safe” is a savings account if you leave all of your money there for a long time, and the interest it earns doesn’t keep up with inflation? What if you save a dollar when it can buy a loaf of bread? But years later when you withdraw that dollar plus the interest you earned on it, it can only buy half a loaf? This is why many people put some of their money in savings, but look to investing so they can earn more over long periods of time, say three years or longer.

When you “invest,” you have a greater chance of losing your money than when you “save.” The money you invest in securities, mutual funds, and other similar investments typically are not federally insured. You could lose your “principal”—the amount you’ve invested. But you also have the opportunity to earn more money.

Start tracking your spending – the first thing you need to do is determine where your money is currently going. See what you are actually spending your money on. There will likely be a few surprises when you see the results of your tracking. You are probably spending more in some areas than you think–small expenses can add up quick. Most people underestimate their small daily “variable” expenses (e.g., food and gasoline) that add up over time. Record every expense as it happens, either in a notebook or an app on your phone or budgeting software on your computer. For example, or

• Set up a budget – Or if you prefer, a spending plan. To manage your money properly and get ahead financially, you need to spend less than you earn. Record your sources of income and when you receive them. Then determine how much of your income is spent on monthly bills and necessities. Plan how you will spend or save any remaining funds. A spending plan does not prevent you from getting what you want, it actually helps you get what you want. After tracking your spending for a month, it is most likely that you will see some areas where you can cut back on your spending to help keep your budget on track.
• What are your financial goals – You have to decide what is most important to you and your family. Get everyone involved in the spending plan and prioritize your goals in priority order. Let them know each month where the plan has been successful and where it hasn’t so that you all can work on it. Stick with your plans and goals and DON”T GIVE UP. Nothing happens overnight and bad habits are hard to change, but they can be changed. Regardless of what life stage you are in, you are likely to have some short and long term personal financial goals. Setting tangible and realistic goals, following them, and tracking your progress is the key to success in achieving all of your goals. If you are married, it is absolutely essential that you and your spouse both share the same financial goals. Otherwise, then it’s almost impossible. Develop your plans together, and review your progress together to make sure both of you are contributing to the same goals. Deciding what your short-term, mid-term, and long-term personal financial goals are is the first step. Some common goals are a dream vacation, a new home, college savings, retirement savings, and an emergency fund. Once you and your spouse have agreed on them, the next step is to determine a good estimate for how much money you’ll need for each of them.
• Save, Save, Save – So now that you have an idea of where your money is going, you can start saving. In order to get ahead financially you need to set aside a percentage of your money. Strive for at least 10% of your gross income, bur if that is not manageable at the moment, put aside about 5% to start. When things improve, either an increase in income or debt reduction, then strive for the 10%. This amount can be increased over time if affordable.

Know why you are budgeting

If you’re developing a budget just because someone says it’s a good idea, it probably won’t help very much. Similarly, if you’re just following the steps in a personal finance workbook because it suggests this is a great way to move towards financial success, budgeting won’t help much at all. The reason behind most budgets is to help you spend less that what you earn and show you where your spending weaknesses are. It helps to provide a structure for you to get stronger in those areas.

Plan for saving to use in emergency

There’s a general rule of thumb when establishing an emergency savings fund: the size of your fund should be equal to at least three months’ worth of your living expenses. Take note that it’s three months’ expenses, not three months of your pay. And when calculating those expenses, be sure to focus on your needs and not on your desires. The whole point of an emergency savings fund is to be able to meet your obligations, not your desires. This means that you should focus on the necessities to keep your household afloat; things such as your monthly mortgage and car payments, utilities, insurance, food, and health care.

Instead of using a credit cards, shop with cash or debit card as often as possible. Pay cash for items under $10 and for eating out

If you cannot control credit card spending, STOP using credit cards! If you don’t consistently pay off your credit cards every month then stop using them. One way to do that is to not carry your credit cards with you. You can hide them or freeze them in a block of ice if they are tempting you. There are many tips on how not to use your credit cards. If you do not use credit cards then you can’t spend money you don’t have and will not be spending more than you earn. If you have credit card debt, you can save money by calling your credit card company and asking for lower rates. The best way to save money on credit card bills, though, is to pay them off as soon as possible.

What are you paying yourself every month? Many people get into the habit of saving and investing by following this advice: always pay yourself or your family first. Many people find it easier to pay themselves first if they allow their bank to automatically remove money from their paycheck and deposit it into a savings or investment account.

Pay yourself first. Auto pay from your paycheck into savings account every month.

Minimize use of credit cards.

Review insurance coverage/deductible.

Review your W-4 exemptions.

Save on utilities by conserving energy and water.

Note which habits cost you money and re-evaluate their importance.

Call your credit card company and request a lower rate of interest/monthly minimum payment.

Establish a gift giving agreement with friends and family.

Use a list when grocery shopping.

Needs Vs. Wants

Use the library instead of bookstores… can also get games and movies at the library.
Have a separate checking and savings account

Avoid Paying Fees. Use a bank with no ATM fees and avoid paying other fees whenever possible – late payments on utility bills, late video rental fees, etc.

Take advantage of sales and use coupons. Plan your commissary shopping ahead of time and stick to a list. Buy more of the items you use on a regular basis whey they’re on sale. Combine a manufacturer’s coupon with a sale price for more savings. Share and swap coupons with other military families and friends.

Shop around and compare prices.
Whether it’s your phone service or car insurance, look around for the best price and value. Check what you’re getting for the money and make comparisons based on all the features and benefits.

Evaluate your cable/satellite TV package. Do you really need all 906 channels? Downgrading your level of service may put more money in your pocket.

Eliminate magazine subscriptions or reduce the amount of magazines you receive. Most libraries carry a selection of magazines to check out. Additionally, most magazines post their content online now.

Calculate the cost of your commute. With gas prices rising, it may be more feasible for you to consider public transportation or carpooling. Try walking or biking if you live close to your destination.

Scale back on the vacation. Saving doesn’t mean denying yourself a trip, but weigh the options. Your kids may have just as much fun at a nearby water park as they would half way across the country.

Alter your attitude about saving. Make it a contest with family or friends to find the best bargain, or low- to no-cost entertainment. Go to community concerts and plays. Or, swap games, books and movies with friends.

Experiment with less expensive products and places. Be open to trying different brands that may cost less with items such as make-up, food or cleaning products. Test out inexpensive restaurants and services and take advantage of offers to first-time customers.

Eat meals at home and prepare a lunch to take to work. The same applies to coffee and other beverages; best to brew or make your own rather than continue a $70 a month habit.

Change the ‘need it now’ mentality. Don’t let shopping be your ‘feel better’ solution. Try to find other ways to unwind like exercise or reading. When you do shop, weigh every purchase and ask yourself if it’s something you must have now. The price may go down considerably if you wait a few months, and you don’t need to be the first one to own the latest gadget or fashion fad.

Pay Yourself First. Strive to put at least 10% of your weekly, biweekly or monthly paycheck in the BANK. You Can Do It!

Too many people underestimate the importance of having a savings account. I’ll be the first to admit that it was never high on my priority list, but we all eventually learn from our mistakes. So why doesn’t everyone have an emergency savings fund? The answer is simple: They spend more money than they earn and have trouble living below their means.

No Savings, Big Trouble

The absence of an emergency savings fund can lead to a severe financial setback. It’s inevitable that unforeseen expenses are going to come out of the blue. So what happens if you’re unable to pay for these expenses?

Some people resort to payday loans because of the “quick fix.” Nowadays, you can literally apply for a payday loan on the web and get the money wired into your bank account the very next day. This is a temporary band aid to the problem, not a solution. Now here is some staggering information for you: According to the Center of Responsible Lending, the average payday borrower ends up trapped in the loan for over a year and 44% of the borrowers become repeat customers. The average interest rates on payday loans are over 400 percent! Isn’t that something? This is why we stress the importance of having some type of savings. So once you’ve created your budget/spending plan, you have a better idea of where your money is going. You’ve made some adjustments and have money to put aside and save.

Stashing the Cash

Once you’ve got your fund built up, the question may naturally arise, “Where should I keep the money?” Remember that this is your emergency savings, not your emergency investments. None of this money – not a single dollar of it – should be placed in the stock market, not even in the most well diversified, blue chip stock fund out there. Keep in mind that you’ll always be better off when you match your money with your financial needs and goals.

Make Yourself Accountable. Another helpful strategy is to find ways to hold yourself accountable for your spending. The people you live with or spend the most time with can be your best defense. Tell them that you’re trying to spend less, and that you want them to give you a hard time when they see you making an unnecessary purchase. Also, make a list of your financial priorities and put it in a place where you’ll see it often, like the refrigerator door or the bathroom mirror, and make a second copy for your wallet, where you’ll see it each time you reach for your cash. If you want to take it a step further, put small sticky notes on your credit cards to remind yourself of what you’re saving up for.

Pay in Cash. People typically spend more money when they pay with credit cards or debit cards. Spending is more real when you actually have to take dollars out of your purse or wallet.

Track Your Spending. It doesn’t matter if you use your smartphone, a computer program or a paper and pencil to track your spending, just use whatever works.

“What you’re writing down is not as important as the act of writing it down.” It helps you become more conscious of your spending and helps you stay committed to changing your compulsive spending behavior.

Wait 20 Minutes. I’ve read that if you are shopping and you happen to see something that you ‘can’t live without’, have the store clerk hold it for you for 20 minutes. Wait that 20 minutes and most people come to realize that they really didn’t NEED that item. Fight that compulsive urge.

Also for online shopping, it has been said to wait 24 to 48 hours before buying an expensive item. It helps you to decipher a want from a need.


Your money earns money. When your money goes to work, it may earn a steady paycheck. Someone pays you to use your money for a period of time. When you get your money back, you get it back plus “interest.” Or, if you buy stock in a company that pays “dividends” to shareholders, the company may pay you a portion of its earnings on a regular basis. Your money can make an “income,” just like you. You can make more money when you and your money work.

You buy something with your money that could in-crease in value. You become an owner of something that you hope increases in value over time. When you need your money back, you sell it, hoping someone else will pay you more for it. For instance, you buy a piece of land thinking it will increase in value as more businesses or people move into your town. You expect to sell the land in five, ten, or twenty years when someone will buy it from you for a lot more money than you paid and sometimes, your money can do both at the same time—earn a steady paycheck and increase in value.

Assess your financial state. Calculate your net worth so that you know where you are in reaching your goals. Add up all of your assets, including savings accounts, retirement funds, home equity, automobiles, stocks and bonds, furniture, property, jewelry and anything else you have of value. Next, add up all of your liabilities (outstanding debt). Subtract your debt from your assets to get your net worth value.

Draft a budget to track your monthly income and expenditures. Include all sources of income, as well as every single expense. This financial planning technique allows you to see exactly where your money is going each month, how much money you should have left over for savings and areas where you can cut back on spending in order to save more each month.

Establish a safety net so that your financial planning is not thrown off by unforeseen circumstances. Set aside some money for emergencies. A good rule of thumb is to save 2 to 3 months of living expenses in a separate account.

Keep up-to-date health, home and/or rental, life and disability insurance plans in order to protect your financial future.

Invest money for long-term goals. Diversify your portfolio between stocks, bonds and cash-equivalents to lessen your investment risk. Hire a financial advisor to help you place your money in appropriate investment vehicles.

Why Is Investing Important?

Investing for your future is not just a good idea, it’s a need if you wish you provide for your future life needs. Saving money for the future is an excellent idea and no financial expert on earth would advise against it. What is given much advice is what to do with this money. The importance of investing is paramount not only to have money for the future, but to protect the money you already have. Inflation on average outpaces the low interest one can accrue by keeping their money in savings account. For this reason the importance of investing should be obvious: your savings actually get lowered each year they sit in a bank account. Yes your bank or credit union is paying you interest on this money, but the amounts are not enough to cover the inflation gap. So in essence each year you have money sitting in savings, it is not just sitting getting stale, it is actually decreasing in buying power. The importance of investing is huge: your money must grow at a rate to outpace inflation or you are losing money each and every year on those hard saved dollars. Your first goal is to avoid major losses. Don’t get greedy. Be patient. Seek the advice of qualified, well-regarded advisers. Keep your costs low. The recipe may not seem exciting, but it has proven to work for generations.

Never invest money you cannot afford to lose. The one downside to investing money is that every investment comes with a certain amount of risk. While there is potential to make big earnings, it is also possible that investors will lose all of their investment if the stock or item they purchased should unexpectedly lose value. Some stocks carry higher risks than others, allowing investors to customize their investments based on their confidence. People interested in making investments can consult a professional consultant if they are unsure about what stocks, bonds or securities to choose.

Please remember that I am not a financial advisor and if you want more information or would like to invest, please see a financial advisor/planner.

Grouped under the general category called fixed income securities, the term bond is commonly used to refer to any securities that are founded on debt. When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out. The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed, or risk free. The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities.

When you purchase stocks, or equities, as your advisor might put it, you become a part owner of the business. This entitles you to vote at the shareholders’ meeting and allows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends. While bonds provide a steady stream of income, stocks are volatile. That is, they fluctuate in value on a daily basis. When you buy a stock, you aren’t guaranteed anything. Many stocks don’t even pay dividends, in which case, the only way that you can make money is if the stock increases in value – which might not happen. Compared to bonds, stocks provide relatively high potential returns. Of course, there is a price for this potential: you must assume the risk of losing some or all of your investment.

A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, etc. The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself.

Take a risk tolerance test to determine your asset allocation. You want to have an idea of your risk tolerance, because in reality we are not all millionaires that afford to lose money. We work hard for what we have and that is why if you are going to start investing then you want a well qualified financial advisor. I can’t stress that enough.

401(k) or 403(b) offered by your employer. For most people, this is the easiest and best place to start investing for retirement. The money is withheld through payroll deduction, and you can save up to $18,000 of your pretax income in 2015 ($24,000 if you are 50 or older). If you leave your job, you can roll the account over into a new employer’s 401(k) or your own IRA. A 401(k) is usually offered by a for-profit company, while teachers and other employees of nonprofits may be offered a 403(b) instead.

SEP IRA. SEP stands for simplified employee pension, and this kind of account is used primarily by the self-employed or small business owners. As the employer, you can contribute up to 25 percent of your income or $53,000, whichever is less, in 2015. These accounts are easier to set up than a solo 401(k). If the business has employees, the employer must contribute for all who meet certain requirements.

Solo 401(k). A sole proprietor can set up an individual 401(k) and make contributions as both the employee and employer, up to a total of $53,000 in 2015 (or $59,000 for someone over 50).

Seek the advice of qualified, well-regarded advisers

IRA stands for Individual Retirement Account, and it’s basically a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the basket in which you keep stocks, bonds, mutual funds and other assets.

Unlike 401(k)s, which are accounts provided by your company, the most common types of IRAs are accounts that you open on your own. Others can be opened by self-employed individuals and small business owners. There are several different types of IRAs, including traditional IRAs, Roth IRAs, and Simple IRAs.

Unfortunately, not everyone gets to take advantage of them. Each has eligibility restrictions based on your income or employment status. And all have caps on how much you can contribute each year and penalties if you yank out your money before the designated retirement age.

Many financial experts estimate that you may need up to 85% of your pre-retirement income in retirement. An employer-sponsored savings plan, such as a 401(k), might not be enough to accumulate the savings you need. Fortunately, you can contribute to both a 401(k) and an IRA.

An IRA can help you:

Supplement your current savings in your employer-sponsored retirement plan.

Gain access to a potentially wider range of investment choices than your employer-sponsored plan.
Take advantage of potential tax-deferred or tax-free growth.

You should try to contribute the maximum amount to your IRA each year to get the most out of these savings. Be sure to monitor your investments and make adjustments as needed, especially as retirement nears and your goals change.

Seek the advice of qualified, well-regarded advisers.

A Roth IRA is a special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax fee.

Like beauty, the benefit of a Roth IRA is in the eye of the beholder and it all depends on the beholder’s tax bracket–both now and when he or she retires.

Although there is no up-front tax deduction for Roth IRA contributions as there is with a traditional IRA, Roth distributions are tax-free when you follow the rules. And because every penny you stash in a Roth IRA is your money—not a tax-subsidized gift from Uncle Sam—you can tap your contributions (but not your earnings) any time tax-free and penalty-free.

Roth IRAs make the most sense if you expect your tax rate to be higher during retirement than your current rate. That makes Roth IRAs ideal savings vehicles for young, lower-income workers who won’t miss the upfront tax deduction and who will benefit from decades of tax-free, compounded growth. Roth IRAs also appeal to anyone who wants to minimize their tax bite in retirement as well as older, wealthier taxpayers who want to leave assets to their heirs tax-free.

You can contribute to a Roth IRA at any age as long as you have earned income from a job.

If you make too much money, you can’t contribute to a Roth IRA. But with a median household income of about $50,000, most Americans qualify for Roth IRA contributions. (If your income is too high, you can convert some or all of the assets in your traditional IRA to a Roth IRA, but you’ll have to pay taxes on the entire amount you convert.

What is a MyRA?

It is a safe, simple and affordable way to start saving for retirement. It is designed to make saving for retirement easy for those who may not have access to a retirement savings plan at their job.
Who is myRA for?

myRA is for anyone who wants a simple, safe and affordable way to start saving for retirement. It is a good option for people without access to employer-sponsored retirement savings plan. Because myRA follows Roth IRA rule, savers must have taxable compensation to be eligible to contribute to a myRA account and generally must earn an annual income of less than $129,000 for individuals, and $191,000 for married couples filing jointly.

How does the account work? The account functions as a Roth IRA, which allows savers to invest after-tax dollars and withdraw the money in retirement tax-free.

But unlike traditional Roth IRAs, the accounts will solely invest in government savings bonds. They will also be backed by the U.S. government, meaning that savers can never lose their principal investment.

Workers will be able to keep the accounts when they switch jobs or contribute to the same account from multiple part-time jobs. They will also be able to withdraw their contributions at any time without penalty. However, anyone who withdraws the interest they earned in the account before age 59 1/2 will get hit with taxes and a possible penalty, just like a Roth IRA. The plan will travel with the employee even after they leave their job. Withdrawals from a myRA are not considered taxable income and can be made at any time, at any age, without penalties. MyRAs will be free of any fees.

How much can be invested?

Initial investments can be as low as $25 and workers can contribute as little as $5 at a time through automatic payroll deductions, a checking or savings account: You can set up recurring or one-time contributions to your myRA from another account, such as your bank or credit union savings or checking account. From your federal tax refund: When you file your taxes, you can direct all or some of your federal tax refund to your myRA. Like a traditional Roth account, savers will be allowed to contribute up to $5,500 a year under current limits.

Once a participant’s account balance hits $15,000, or the account has been open for 30 years, he or she will have to roll it over to a private sector Roth IRA, where the money can continue to grow tax-free. Workers will have the option to switch to a Roth IRA at any time.

Thank you!