Day 9: Diversification Delivers (Investing In Your Future)

Main Point: Understand that when you invest, you put your money at risk.

I love this point that Michelle made in the video: “The importance of investing comes down to inflation.. Your money today has to buy the things that you need tomorrow.”

Today’s assignment: Examine investments to make sure you’re well-diversified.

View a website that explains the basics of investing, such as www.finra.org or www.mymoney.gov. Review investment statements – including your retirement account. Look at where and how you’ve allocated the money in your 401(K) or other retirement plans. Is it spread across various asset classes? Or have you concentrated your contributions in just one or two types of asset categories? In other words, is your money all in one basket?

What I wanted to buy today, but didn’t:

Nothing. For real.

What was easy about today?

Doing my budget was somewhat easy because I already had a solid foundation from my Google spreadsheet and budget from the CCCS of Greater Greensboro.

What was hard about today?

Turning down my coworkers again for a happy hour. Actually, it wasn’t that bad, but a coworker said I’m affecting her fun. She said, of course, hanging out would be more fun if I were there. A little bittersweet.

What was really difficult today was learning more about debt consolidation loans. The pros and cons vary, but one that sticks out is:

While the benefit of consolidating your debts into one loan with one lower monthly payment may provide you with a great deal of emotional and financial relief, it may also leave you feeling prematurely confident about your financial situation. This could cause you to let your guard down and incur additional debt before you have paid off the consolidation loan, starting the cycle all over again.

Ouch. I actually emailed Michelle’s Washington Post email account seeking her advice. I’ll see what she says, but from past answers she’s given people, I think she’ll say forgo the consolidation loan. Studies show that people end up changing cards right back up after getting the debt consolidation loan, Singletary said. She generally tells people to get the Debt Management Plan.

What did I learn from today’s chapter?

Here’s what I learned:

  1. Maintain a cash reserve.
  2. Get adequate insurance coverage.
  3. Allocate assets widely.
  4. Never borrow to invest.
  5. Borrow strategically.

What I was feeling today about my finances?

I was feeling pretty good. Doing my budget this morning according to Michell’s rubric stung a little bit. I have no room – really no room – for error in the budget and I’ll have to pay some bills early, with my second paycheck since so much stuff is do during the first pay period.

This evening, I filled out an application to work at my favorite clothing store, but I’m too afraid to drop it off in person.

Then I checked my email and Check, formerly PageOnce, sent me a scary email. Subject: “Your credit score is at risk.” It was referring to my high bank credit card balances. Something’s gotta give.

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