Albert Einstein once said “compound interest is the greatest invention of man.” If Einstein said it, who are we not to listen.

The first step I think anyone should do is get themselves out of consumer debt. Its just like flushing money when you pay these ridiculous interest rates. Consumer debt is basically major credit cards (Mastercard, Visa) or store credit cards (Best Buy, Sears). Good debt would be a mortgage or sometimes a even a car loan. Car loans show that you can pay off large balances in a timely fashion and can possibly raise your credit score over time. Its ok to put a little something away towards your emergency fund while you pay things down, in case of emergency the last thing you want is more debt, but the bulk of your money should go towards getting yourself out of the hole. Of course this might take come sacrificing, not going out as much, not buying the beautiful Kenneth Cole leather that just went on sale(I had big Leather vice when I was younger), or maybe even taking the bus every now and then to save on gas money. As my mother always says, "If you want anything in life, you have to make sacrifices".

Just think of it this way, carrying a $1,000 balance on a credit card with 18% interest is like having a savings account that takes out 18% of your money every month. Would you take your money out right away, or would you take it out slowly and lose more and more money each month? This is what paying the minimum on your credit cards is like, you just give these banks more and more of your money every month. It costs you 18% of your money to borrow theirs. I understand it may not be financially possible for some to just go and pay off all of their credit cards, it wasn't possible for me. But sit down and come up with a plan to get yourself out. Who can you pay off first? How much extra a month can you put towards debt? Can you get a 2nd job? You gotta do something or else they will own you. Here is how I did it.

The 2nd easy step would be to sign up for a 401K at work if they offer one. This is good because it takes no effort from you. The money comes straight from your paycheck and into your retirement account. It never touches your hands so you don't have to fight the demons that tell you to spend just a little bit on that Bannana Republic sweater that goes with the jacket :) Once the money is in, I don't suggest digging into this unless you absolutely have to.

I know a lot of people say "your borrowing from yourself, its your money" or even "you pay yourself back, with interest". But the money you could have gained you will never get back. This is similar to the opportunity cost in business and investing. Even though you pay yourself back, the money you took out is not in the account earning interest/capital gains, it went towards your new car. This is money is for you retirement, keep thinking of yourself on some sandy beach sipping Pina Coladas with some Bob Marley on in the background and even remotely thinking about work. This should keep you from touching those retirement accounts. Most employers offer some form of a company match also, this is like an instant return. If your job doesn't offer a 401K, max out a ROTH IRA. These savings can grow tax free and you can also withdraw tax free since it is funded with after-tax money. The best method would be to use both of these, but if you can't, at least try to use 1.

After you set up your 401K, try to get an online saving account such as ING, HSBC, or Emigrant Direct. These accounts offer much higher yields than what your local bank probably offers. Most will also allow some form of an automatic deposit every month, or every two weeks. So this is sort of like the 401K in that it takes no effort form you, they just take the money straight from your checking account. No forms, no need to write checks or authorize anything. My personal preference is ING, just because I've been with them for so long and also because they allow you to use several sub-accounts, such as a vacation fund, baby fund, Emergency fund, etc. This just makes it easier for me to stay organized and keep track of things. Unless you have a checking account set up with these providers, it will take about two business days for the money to get from them to your linked checking account if you do decide to withdraw. This is good for me, but if you have more control and want more access to your money, you can go ahead and open a free checking account with whomever you choose to open the savings account with. You'll be surprised how happy it makes you when you see "You have earned %5.25 so far this month". It's only $5.25 but you didn't have to do anythign but save your own damn money. The more you put in, the more this number grows, the happier and more relaxed you get. Damn that Einstein really was a genius.

I think building an emergency fund of at least 3 months worth of living expenses is a nice little cushion, but this varies depending on who you speak to. As long as your saving something and who you have savings goals, your ahead of the game. The national savings rate was at negative 1% for 2006 according to the US Department of Commerce. Negative 1%, that's astounding for one of the richest countries in the world. Go against the grain and put some money away.

That's it, this is how I started and it should be a good start for anyone. Have your money earn interest for you instead of costing you interest. Thats how you make your money work for you. You'll be surprised how fast this snowball grows and picks up momentum. Of course you can always invest your money in different mutual funds or even play the 0% Balance Transfer game, but you have to start somewhere. You can't build a house without a good foundation, or you can't make a sandwich without good bread, you can't rock a nice outfit with beat up shoes, and you can't have a good defense with a weak defensive line, etc. :) You have to work from the bottom up, get a good baseline and then watch how easy the rest will come to you.

Thanks for reading

I love you Baby

Heres a little start from the Oracle of Omaha if you want to read up on investing, Warren Buffet


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    Making money work for us require us to free ourself from the debt first and have a deep sight where our money is going and also look for ways to increase the asset side we have and minimize the liabilities.  

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