How to Invest Your Money for the Future

by Bonnie Conrad, Demand Media
    Invest your money wisely.

    Invest your money wisely.

    No matter what you do for a living or how much or how little money you make, investing for the future is critical. These days, fewer workers than ever can rely on a traditional defined benefit pension plan, so it is up to every worker to save for his own retirement. Learning to save and invest for the future is very important, and that process should start as soon as you start earning your own money.

    Step 1

    Build an emergency fund equal to at least three to six months worth of living expenses. Having an emergency fund in place will protect you in the event of a job loss, large medical expense or other financial shock.

    Step 2

    Check with your employer and ask if there is a 401k plan in place. Request an enrollment booklet and review it carefully. Invest at least enough to get the full company match, but aim to invest more than that over time. Consider enrolling in an automatic escalation plan that boosts your contribution percentage automatically each year you remain in the plan. As of 2010, you can invest up to $16,500 in a 401k plan, plus another $5,500 if you are 50 or older. The administrator of the plan will keep track of your contributions and suspend them once you reach the limit for the year.

    Step 3

    Contact several mutual fund companies to ask about their individual retirement account, or IRA, plans. The IRA is designed to help workers save for retirement by providing a tax break, either up front in the case of a traditional IRA or through tax-free withdrawals in the case of a Roth. In addition to mutual fund companies, banks and brokerage firms can administer your IRA for you as well. As of 2010, the contribution limit for IRA accounts is $5,000, plus an extra $1,000 for those age 50 and older.

    Step 4

    Set up an automatic monthly investment into your IRA by directing money to be transferred from your bank account to the mutual fund within the IRA. This automatic investment forces you to save and also forces you to live on less than you earn.

    Step 5

    Set up similar automatic investments for mutual funds outside your IRA and 401k if you still have money to invest. Investing a set amount of money each month means you automatically buy more shares when the market is down and fewer when it is at all-time highs. This approach, known as dollar cost averaging, is an excellent way to build wealth for the long term.

    About the Author

    Based in Pennsylvania, Bonnie Conrad has been working as a professional freelance writer since 2003. Her work can be seen on Credit Factor, Constant Content and a number of other websites. Conrad also works full-time as a computer technician and loves to write about a number of technician topics. She studied computer technology and business administration at Harrisburg Area Community College.

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