Easing Money Worries

By implementing simple financial controls, you can greatly ease your money worries. Here are some of the more straightforward ways you can control your future.

Avoid buying trouble.  Real estate investment property is a difficult way to make money. The cash flow obtained from rental property needs to be analyzed in terms of the amount of capital invested to generate the cash flow. When the net annual cash flow is divided by the equity invested, the real return is often fairly paltry. Better: Avoid the landlord hassles and stick with appropriate mutual funds that suit your lifestyle better.

Tame your expectations.  Looking at your stocks and mutual funds in the newspaper every day generates needless stress. The market has an upward bias toward a long-term average annual total return of about 10% or more per year. Look at your investments quarterly rather than daily.

Simplify your investments. Avoid stock picking. It is unlikely that you will ever be good at it. Rely on the managers at mutual fund companies who have access to considerably more research data than you can possibly obtain. In addition, the fund managers have much greater computer horsepower to monitor the markets and identify buying and selling opportunities. If you insist on picking your own stocks, do so in your retirement account to avoid the accounting hassles at tax time. Avoid trading your stocks on a frequent basis.

Simplify your transactions. Use one credit card for business and a different credit card for personal use. Make only one cash-machine withdrawal a week.

Use automatic investment plans. Set up monthly transfers between your checking account and your mutual fund custodian so that investing is on autopilot. These plans force you to save and help you to “buy low” when the market is down and you might otherwise skip making the monthly investment if you had to write a check.