The following are the things we learned this week:
- We learned why we might want to invest. We invest to beat inflation, for compound growth, and just for the fun of it.
- How we can make 22.99% tax free! Spoiler – It is saving money by paying extra to your credit cards until they are paid off. Your interest may vary. Note that since personal credit cards are not tax deductible, there is no tax consequences for paying them off early.
- We learned some ways to evaluate the financials of a company we might want to buy shares in. For instance, Facebook. We took the long way to get there, though, as financial measurements are usually provided. As an example, the current ratio. All analysis done on MSN Money.
- We learned why there is magic investing in stock of only 10 individual companies. We reduce risk by buying more than 1, but risk is only incrementally gained after 10 or so.
- We learned general ways (not specific ways) to reduce your expenses and increase your income so you can get 20% of your income into savings. We save for our emergency fund and so that we can invest. 20% is a goal, yours can be more or less depending on what you want to try to achieve.
- We learned what to do with our employer’s 401(k). There is free money here folks! And a super easy way to save and invest. Downside: your returns are likely to be lower than picking your own (10) individual stocks.