It is a depressing statistic that should scare you. Four out of ten “retirees” will probably not be enjoying their golden years and may have to continue working just to get by. If you have not thought about or prepared for your later years, there is no better time than the present to start saving and investing.

Since I am not a professional financial advisor or money manager, I cannot give personal investment advice; however, I can give you a starting point on saving and investing so you do not end up being a statistic.

There are many common sense “sayings” about investing and here are some favorites:

1. Invest. You got to be in to win.
2. If you have nothing saved or invested, you will have nothing.
3. It is never too late to start, but the earlier the better.
4. Compounding rocks!

One of the biggest excuses that I receive when talking to people about investing is that they say, “Sure I would love to invest, but I don’t have any money to invest with.” Well, the truth is that we all have money to invest with and it starts with some discipline and sacrifices by savings from everyday expenses. It does not matter that you are only able to set aside $50 a month to invest with. That is where the magic of compounding comes into play.

Okay, where is this extra “found money” to invest coming from? Here is the answer.

Look hard enough and you can find funds available to save and invest with. For many people, there is extra money lying around hidden in unnecessary expenses. The first thing you will have to do is a personal audit of your finances. Make a list of your expenditures, separating the “wants” and “needs” and then see where you can cut back, downgrade, change habits or even sacrificing all together. You will be surprised how easy some of the things are.

Here is a list of things that you can do that will add some bucks to your investing funds.

A. Go Green. One of the major expenses is your utility bills.

1. Buy energy efficient appliances.
2. Replace your incandescent light bulbs to CFLs (compact fluorescent lights).
3. Program and change your thermostat settings.
4. Maintain your weather stripping, insulation and air filters.
5. Make sure lights are turned off in un-occupied rooms or install automatic switches.
6. Do less laundry by having full loads.
7. Lower the hot water heater temperature
8. Find additional ways to conserve water (too many to list and you get the idea)

The average home spends over $1900 per year on electric bills. By doing the things listed above you can save 15-20% on your bill. That translates to an extra $285 – $380 to invest with. Note that savings for going green with water and gas have not even been accounted for which would add additional savings.

B. Save money on your car.

1. Do you use premium gas for an older car? Switch to regular and save at least 10% on fuel costs. That’s about $20 per month if you are currently spending $200 a month.
2. If you have a paid off vehicle, you might want to consider reducing your insurance policy from full coverage or increasing the deductible. This can save you a couple of hundred dollars per year.
3. Keep your car maintained and tires properly inflated to cut down on gas consumption.
   Excessive speeding above 70mph will use more gas because of unburned fuel.

C. Needs and Wants.

1. Do you really need both a regular landline phone and a mobile? Lose the landline can save you $25 bucks a month.
2. Check your mobile phone bill usage to see if you can downgrade the plan if your usage doesn’t require all the bells and whistles.
3. Do you actually watch all the 400 channels available from your cable or satellite service? Get standard or basic services and you can save at least $20-30 per month.
4. Can you do without the $7 cup of java from Starbucks every day? That can be a $140 savings in a 20 business day month or $210 if you drink one every day.
5. Do you absolutely have to see every new movie that comes out or can you just wait until it comes to the movie channels that you have already subscribed to?

These are only “Tips” of the iceberg on how you find the extra funds and money to start saving or investing with. If you can execute the majority of the ideas above, it would not be hard to come up with at least a $100 to $200 per month to invest with. Be creative and you can find even more ways to have that extra investing money.

Power of Compounding

One to two hundred dollars a month may not seem much, but that is where the power of compounding comes into play. It can increase exponentially the earlier you start and the type of investment you make. Taking the example above where you were able to obtain $200 per month in “found money”, gives you a total of $2400 per year to invest with.

Let’s assume you are 30 years old, and each year you continue putting the same $2400 into an investment that is averaging a 15% per year. By the time you reach retirement, the initial amount you had invested and yearly contributions would have compounded to over $2.7 million dollars.

The amount on your return will of course be dependent on the type of investment you choose and how soon you start investing. The longer you wait the more money that you can potentially make disappears. Time is money, so get started.

Editor’s Note: Believe it or not, 15% or more per year is possible. There are a number of funds that have been paying in the double digits for the past 5 years. Some that were closed to investors have now opened up for a limited time for new investors. A good source to find funds and their performance is Morningstar.com.

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Both types however lack choices and options in terms of the type of investments that you can participate in. Usually, you are limited to a portfolio of stocks, mutual funds, money market funds and CDs. The majority of the banks, insurance companies and stock brokers that are the custodians and plan administrators of these IRAs do not offer any other investment choices.

If you want more options and better control of your investments in an IRA, you will have to find a plan administrator that specializes in self-directed IRAs. Self-directed IRAs gives you all the tax benefits of the traditional or Roth IRA, but more freedom to invest in different types of assets.

What it means to be “self-directed” is as simple as it sounds. You, the individual investor, have complete control over selecting and directing your own IRA or 401K investments.

“In a self directed transaction, you make all of the decisions regarding your investments. The self directed IRA custodian or self directed IRA administrator completes the documents required to establish your account and purchase your investment.” – The Entrust Group

Here is a list of some of the assets approved by the U.S. Treasury regulation and IRS that can be held in a self-directed IRA, but not available in the non self-directed type:

• Real Estate
• Limited Liability Companies
• Private Limited Partnerships
• Secured and Unsecured Notes (Mortgages and Deeds of Trust)
• Partnerships and Joint Ventures
• Private Stock
• Judgments/Structured Settlements
• Tax Sale Certificates
• Car Paper
• Factoring
• Accounts Receivable
• Commercial Paper
• Equipment Leasing

The main benefits of the self-directed IRA are the variety of assets that can be invested in. There are restrictions that have to be complied with, like the penalties for early withdrawals when dealing with traditional IRAs; self-directed IRAs are no exception. Individual asset types for self-directed IRAs may have its own set of rules and restrictions when made part of a retirement plan as well.

It is beyond the scope of this article to go into all the details of the different type of assets and the many creative ways of using them to your advantage, but here are several scenarios.

1. Lending your IRA fund as a loan to friends and family; why pay a bank interest when they can pay you? A win-win for both parties.
2. Investing in raw land and turning the profits back into the tax deferred IRA for reinvesting
3. Investing in a start-up company through a private placement

There are countless ways that a self-directed IRA can be used to invest your money. Self-directed IRA accounts will require a specialized custodian or administrator to open an account and invest with. These accounts have to be held with a custodian who allows non-traditional investments in the IRA.

To learn more about self-directed IRAs you can visit The Entrust Group for additional information. They are a specialized plan administrator with over 25 years of experience in the self-directed retirement planning arena.

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First of all, as a fair warning, do not attempt this strategy unless you fully understand the risks, can afford to take a financial hit should your investment opportunity goes south and that you are able to make a minimum monthly debt repayment from current income.

If you are fortunate enough to have low debts, good credit ratings and have credit cards with a generous credit line, you probably have received more than one offer in the mail from these credit card companies with blank checks attached. The offers range from 0% interest for 12 to 18 months or 3.99 – 4.99% for the life of the loan.

Try to get that kind of interest rate for a personal loan from your local bank; you’ll be lucky to get less than 15% plus having to provide collateral in some cases.

Depending on the credit card company, the offers will differ on terms and loan fees. Read the fine print to make sure you are getting the best deal on the loan and understand the fees.

In most cases, writing yourself a check from the credit card company carries either a transaction fee that is a percentage of the loan amount or a minimum charge per check you write. Normally, the percentage is no more than 3% for the total amount of the loan. Can you see how this can be a source of low interest funds for your investment? The cash is practically free.

Here is an example of how this will work with an offer I have taken. I write myself a check for $10,000 using the 0% interest for 18 months and it costs me $300. Now, all I have to do is get into an investment that makes more than 3% within this time frame and I am in profit. Sure, I can stick that 10K in a CD and make a couple of percentage points, but that would not even be worth the trouble. I am looking to put the money in investments with the potential for higher returns in the double digit range.

Remember, this is for the short term until you become liquid from other investments to pay back the loan before the expiration of the credit card term. In the 0% scenario, the interest will revert to what ever the current interest rate is when the 18 months is up. If the 3.99% route was taken and I have not paid back the loan, my investment will need to perform better than 3.99% per year to be in profit. I will also have to take into consideration the minimum monthly payment to keep up the loan.

In the past, with a well chosen investment, this strategy had worked for me in achieving a profit minus the paid interests and fee for the money I had borrowed. There was never a guarantee of success; however, it was a calculated risk. One in which I knew I would eventually have had the funds available from other assets to cover the debt should the investment not pan out.

All that was done was to buy some time and invested with money that I did not have available at the moment. Nothing beats making money with “other people’s money”, -in this case the credit card company’s.

Note: While this strategy has worked for the author, it is not a guarantee that it will work for others and is highly dependent on the performance of the investment. This is not recommended for the inexperienced investor or those that currently have large debts. Building wealth starts with paying off outstanding debts and a good place to get support from a community of people with the same goals in mind is at debtconsolidationcare.com.

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