By Joaquin Galvan
Realistic goals are important when it comes to money. The average person’s short-term financial goals should be simple: Try not to rack up too much debt, and find a steady job. When making financial goals, you should consider these three values: independence, stability, and security.
Investing is key to acquiring wealth. I try to remember my FIOA – the Financial Investment Options of an American. The primary place for passive investments is government security, for example, Treasury securities or U.S. Savings Bonds, because they have low risk or no default risk.
Non-governmental bonds are very liquid, meaning they can easily be sold, but you won’t make much money buying and selling them; they have almost no return. However, most are exempt from state and local taxes.
Certificates of Deposits are another investment option. However, a third party should be involved; there is some liquidity risk (losing money) without someone handling your money. The inflation on these investments is something that you should be aware of. Typically every year the inflation is three percent.
Investment in precious metals is another time-honored, secure option. The net investment of precious metals has a long history in America. The dollar used to be tied to the price of gold. However, President Nixon took us off of the gold standard in 1971 because of domestic shifts in the country. Precious metals remain good investment in the sense that the government will always buy them.
There are many types of investors, however, investing in small businesses or stocks requires careful research, because of the liquidity risk. It must be considered that the money that is tied up with an investment may get locked up and could be inaccessible in a time of crisis. It’s risky to invest in the stock market because of this.
One of the benefits of secure, stable and accessible investments is that you can claim them on taxes. The higher the liquidity, the more likely they would be exempt from state and local taxes.
There is a saying, “Don’t put all your eggs in one basket.” When I was in Ecuador, I learned that chickens aren’t the only things that lay eggs. Many animals lay eggs and managing your money in this way is diversification of investments. Snakes tend to eat eggs and credit loan ads on the radio are the same to your pocket book.
If you are considering investing, it would be wise to get some financial education or advice. Some banks and credit unions offer free financial advise, and another valuable resource is local nonprofit AAA Fair Credit. Visit the website a https://faircredit.org.
Joaquin Galvan is a 24-year-old native of the Guadalupe neighborhood. He took a class in family economics at the University of Utah, and reads The Wall St. Journal and Barron’s in his free time. He hopes to build wealth investing in beanie babies.