How do you prioritize your investments? If you are just learning about personal finance there is an element of discovery and a desire to act right away. Even if you are seeking professional advice (you should!), you are also responsible for knowing enough to make informed decisions.
The other week I talked about DRIPs. They are a great way to invest a small amount of money ($250-$500 to start), and then let the investment ride. If you’ve got a long time horizon they can be a good choice.
I got all excited about buying my first DRIP stock. Should I invest in Sallie Mae, owner of my student loans, as well as yours? Ha! Profiting from the beast! Or maybe invest in something else..?
Whoa, Nelly!
I looked over my current financial picture and decided that a DRIP, as beneficial as it could be, would have to take a back seat — for now. Why?
What made me decide to wait was that I tallied up what I’ve contributed to my IRA so far this year.
What have you contributed to your IRA? Time is a-tickin’…use it or lose it!
As you know, its a tax-preferred vehicle whether you take the Traditional, or the Roth (which is funded after-taxes, and never taxed again). I’m funding mine in small amounts ($50/month), with the occasional additional contribution. Still, I have a way to go to maximize the $4,000 limit. (Arguably more as a self-employed individual… but I’m trying to reach that benchmark first).
Here’s a link on IRA contribution limits: http://beginnersinvest.about.com/cs/iras/a/iracontribution.htm
To maximize dollar-cost-averaging make sure to take a look at your monthly budget and determine how much you can spare to put away. And put it away first. This is particularly crucial the younger you are!
As they say: be fearful when the market is greedy, and greedy when the market is fearful.
Should we add another one? Be flexible with your strategy, but committed to it. Sounds like an oxymoron, right?
Here’s what I decided: I’ll maximize my IRA contributions before striking out on individual investments. My first commitment was to that. Perhaps later I’ll add more.
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