Give Up Your Biggest Vice!

By Kara Stefan

Now, more than ever, a woman needs to take control of her financial future. That's because we're making "real money" now, living longer, and living more independent lives as a result of divorce rates and the growing numbers of single moms.

Every woman, no matter how young or how poor you think you are, can muster up the cash to begin an investment plan. In fact, the younger you are, the greater your opportunity to create significant wealth over a long time span. And if you consider yourself poor--you'll get out of that rut a lot faster if you start an investment plan today.

Don't wait for a better job or some wealthy prince to waltz in and rescue you. It didn't work for Ivana Trump, and it's not likely to work for you.

The Easiest Way to Invest

The easiest way to invest is a little at a time. With an automatic investment plan, you can sock away as little as $50 a month into a mutual fund via an automatic transfer between your bank account and the mutual fund company. By now you're probably wondering how to come up with $50 a month.

Well, you can start by giving up your biggest vices. Here are a few ideas:

• Forgo your morning gourmet coffee and drink the stuff they have at work.
• Quit smoking--a two-in-one investment for a long-lived future.
• Take lunch to work everyday--eat out as a treat only once a month.
• Go to twilight movies for the cheaper rate.
• Buy clothes that don't require dry cleaning.
• Buy fewer magazines and trade with friends.
• Borrow videos from the library instead of renting.
• Cancel cable and read more.
• Switch to higher deductible health, car, and homeowner's insurance plans and use your ensuing investments as back up.
• Give up shopping at that one store that is your weakness, be it Price Club, Target, TJ Maxx, or Nordstrom.

Consider your morning routine. If you took that $3.05 a day you spend on a muffin and coffee and invested it for an average return of 10% a year over a period of 30 years, you would end up with $212,378. Less fat and caffeine and greater savings--an equation that's hard to argue with.

Regular Investing Costs Less

Investing the same amount of money each month is called dollar cost averaging, and it's more cost-efficient than waiting for your year-end bonus or tax refund. The table below shows you why:

The average price per share was $8.66, but the actual cost per share was only $8.40 (divide $300 by 35.68). While that 26 cents per share may not seem like a staggering amount, over time cents can add up to significant dollars. Dollar cost averaging is to investing what coupon clipping is to shopping, only it requires a lot less time and energy.

Where to Invest

One reason women make great investors is because they're not afraid to ask for help. So don't put off investing because you don't know what you're doing--after all, you wouldn't not go to a dentist just because you don't know how to fill a cavity.

The following may give you some parameters:

• Stocks--for the do-it-yourselfer.
• Mutual funds--for those who want a pro to manage their investments.
• IRA--a retirement plan where you can't touch the money before age 59½ without a penalty.
• 401(k)--ditto the IRA issue; however, a lot of employees contribute money so it's like having an ongoing bonus.
• Annuities--ditto the IRA issue, but it's a viable idea for women worried about outliving their income.

Investing is really very easy. Women who juggle multiple projects, step- and biological children, ex- and current husbands, parents, in-laws, pets, phones, faxes, e-mails, laundry, housecleaning, carpools, family birthdays, and the holiday season will have no problem with investing.

It's nothing compared to childbirth.

To get started with a financial plan, go to Where You Stand.

To learn more about various investment options, check out Portfolio Basics.

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