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New to Live Richer Challenge: The Fundamentals? Learn more about it HERE.

Week 5: Insurance & Investing

Today’s Easy  Financial Task: Get educated

How to rock this task :

  • Define key investment terms
  • Identify investment sites and resources

Now on to investing. Investing is the only way to gain real wealth, so let’s get to it. A rich investor is an educated investor. Here are a few key terms to get you started:

Net worth – A measure of your monetary value. Your total assets (things that put money into your pocket), minus your total liabilities (things that take money out of your pocket).

Assets – Anything that adds value and increases your net worth, ie. a home (usually), art (possibly), stocks, business, etc.

Liabilities – Anything that loses value and decreases your net worth, ie. a car, electronics, clothes, those designer shoes (real or fake -they still decrease in value).

Interest Rate – A rate which is charged or paid for the use of money. Interest rates go both ways: if you’re borrowing money it will cost you, if you’re lending money (i.e. CDs, savings accounts etc.) you make money.

Stock – A share in a public company that, when purchased, makes you part owner.

Shareholder– An owner of shares (or stocks) in a company.

Dividend– Money paid regularly by a company to its shareholders out of its profits.

Mutual Fund – Funds that include a group of stocks, bonds, or other investments. Unlike a stock where you purchase one company at a time, with mutual funds you purchase a group of investments based on your investment goals.

Bonds – An IOU from a company or municipality. You lend them money by purchasing their bond and they owe you back according to the terms of the contract.

Traditional IRA vs. Roth IRA – An IRA is an Individual Retirement Account. The main difference between the two has to do with the income tax on the money you put into the plans. With a Traditional IRA, you pay the taxes when you withdraw the money at and during retirement. With a Roth IRA, it’s the exact opposite and you pay the taxes on the front end, but there are no taxes to pay once you retire. In both Traditional and Roth IRAs, your money grows, tax free, while it’s in the account.

401k – A savings plan that allows employees to contribute a fixed amount of income to a retirement account and defer taxes until withdrawal.

Get even more terms and resources from sites like www.investopedia.com and www.learnvest.com.

Before you leave, I want you to know something. I want you to know that know matter where you are or how many mistakes you’ve made with your finances in the past, there’s hope. If you’re willing to do the work; if you’re willing to stick to it; if you’re willing to ask questions and take action with the answers, you CAN and WILL create a better life for yourself and your family.

There’s no such thing as a small financial choice. They all matter. Prudential did a very cool experiment with the World’s Largest Domino. It illustrates this point beautifully. Just watch and see…. 🙂

DIRECT LINK: http://youtu.be/xZpjmBGIp44 

Now that you know some key investment terms, have some site resources and a sprinkle of inspiration, tomorrow we’ll identify your investment goals.

Today, I'm a little bit smarter about basic investing. Day 32. #LIVERICHERChallenge #thankyoupru Click To Tweet

Question: What new investing term did you learn today? How do you feel about investing in general? I’d love to know. Please share with me in the comments below.

Live richer,

Tiffany

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FYI:

My Lisa Rule: I have 4 sisters and Lisa is the baby (well she’s not a baby anymore). Of all of my sisters I’m the most protective over her. Before I share any product or service with you, it must pass my Lisa Rule.

What’s the Lisa Rule? If I would not advise Lisa to use a product or service, I won’t advise you to. YOU are my Lisas. I feel protective over you and your financial journey.

The products/services mentioned in this post pass my Lisa Rule. Yes, I’m an affiliate, but I would not recommend a product or service that I didn’t believe was helpful and useful. 

  • Stacey

    My husband and I both have retirement plans through work. Do you recommend additional investments? Do you recommend having a certain amount of regular savings (emergency, etc) before investments?

  • Nafeesah Smiley Leverett

    I learned about the different retirement plans. I never had a job that offered those types of benefits. Even the job I’m working in now. My goal is to work for myself in the long run so I will love to learn about retiring for the future.

  • Layla

    About half of these terms I’ve heard repeatedly but never knew what they were. I’m really excited about the prospect of investing my money and can’t wait to learn more!