Principles of Investing CHAPTER ONE
CHAPTER ONE: PLAN FOR LIFE
Planning Process
a. 6 Steps
b. Plan – A method or process worked out in advance that leads to a goal. It should be systematic and flexible.
PLAN VS. BEING IMPULSIVE
You can act on spur of the moment – But think it out
Dream vs. Plan
Dreams – Source of pleasure
Plan – to make it happen
2. Develop a Career Plan
a. Do an honest self-appraisal
i. Aptitude test
ii. Best subjects in school
iii. Hobbies
iv. Favorite Activities
JOB FACTS
1. Gap between low-skill and high skill jobs is growing
a. High skill requires additional training and education
2. Education Pays – More Education ® Earn More
3. Technical Fields Growing ® 1950 1991 2000
60% 45% 15%
Unskilled
4. Jobs are less stable
5. Fastest growing group of workers – People working out of their home
a. Accountants, Computer Experts, Sales People
Choosing a field goes with choosing a college.
3. BUDGETING
a. Money Management
b. A plan for dividing your income into spending and saving options
c. Future spending based on past spending and new information
TWO TYPES of EXPENSES
-FIXED – Amounts you are committed to pay
ie: Utility, Rent, Mortgage, Insurance
-Flexible – Amounts that can vary based on what you choose to spend.
ie: Entertainment, Food, Vacations
Your Income - Fixed and Flexible Expenses = Disposable income (Fun Money)
4. Manage your Money
a. Apply and use credit
i. Only when needed – Major purchases (car, home, college)
b. Be Careful of Credit Cards
i. Avoid Impulse Buying
ii. Research – Consumer Reports
iii. Comparison Shopping
c. Do – It – Yourself
i. Saves money if you can do it (repairs, maintenance)