Skip to main content

How to dodge the debt train

Debt is a problem, and it will come calling home sooner or later. Be prepared. It could cause massive upheavals in global financial systems, and result in large moves down in markets. See my previous post on debt.

 But do not be afraid, just be prepared. I subscribe to a free weekly newsletter from John Mauldin called Thoughts from the Frontline.  You should subscribe. It's worth your time.

 In the July 20 issue, he provides this advice to small investors. 
If you are early in your investing career or still consider yourself small, the most important things you can do are:
  1. Simplify your lifestyle and save more money. That’s not particularly fun, but in the long-term will pay huge dividends.
  2. Get out of debt. Do not carry debt on credit cards. Pay your credit cards off as quickly as possible. Saving is easier when you aren’t paying 18% interest. You’re not going to get 18% on your investments.
  3. There are a whole host of options for how to save. For small investors, there is not much magic. Some of you are going to roll your eyes, but I suggest reading some books by my good friend Suze Orman, or (if you have a more religious bent) Dave Ramsey.
  4. Move as much money as possible into tax deferred accounts. Taxes are the #1 killer of investment returns... 
Where to invest? Now I’m going to talk out of both sides of my mouth. For smaller accounts, use low-cost index funds or ETFs. But consistent with my philosophy, you do not want to buy and hold forever. You need some kind of risk management rule. If nothing else, use the web to run a 200-day moving average on whatever index funds you choose. Check once a week and if your fund goes below the moving average, then rotate into a short-term Treasury fund. Jump back in when it crosses above.
I couldn't agree more.
Labels:

Comments

Post a Comment

Thanks for the comment. Will get back to you as soon as convenient, if necessary.

Popular posts from this blog

California: A Model for the Rest of the Country, Part 2

Part 1 here . On Leaving the Golden State Guest Post by NicklethroweR . Posted on the Burning Platform. The fabled Ventura Highway is all that separates my artist loft from the beach where surfing first came to the United States. Both my balcony and front patio face the freeway at about eye level and I could easily smack a tennis ball right on to the ever busy 101. Access to the beach and boardwalk is very important to a Tourist Town such as mine and I can see one underpass from my balcony and another underpass from the patio. Further up the street are two pedestrian bridges. Both have been recently remodeled so that people can not use it to kill themselves by leaping down into traffic. The traffic, just like the spice, must flow and the elites that live here do not like to be inconvenienced as they dart about between Malibu and Santa Barbara. Another feature of living where I live would have to be the homeless, the insane and the drug addicts that wander this particular...
Post a Comment
Read more

Top Five Consumer Cyber Security FAQs

Business, technology, environmental and economic changes are a part of life, and they are coming faster all the time. All of these changes and advancements can be distracting and make us more vulnerable to cyber scams. That's why protecting your credit is a critical part of protecting yourself from cyber security threats. Security researchers have reported that hackers and scammers are using any opportunity or vulnerability to target both individuals and companies. You may have already seen these attempts in the form of fake emails or calls. Here are the top five questions Equifax ®  has received about how individuals can protect themselves from cyber security threats and help to improve your credit protection. 1. How can I better protect my credit? Check your credit reports frequently. You can get free credit reports from the nationwide credit reporting agencies (Equifax, Experian ®  and TransUnion ® ) at annualcreditreport.com. Check your credit reports frequently to closely...
Post a Comment
Read more

School Choice Passed by Texas Senate

The Texas Senate on Thursday approved a $500 million school choice bill mostly along party lines after hours of passionate debate. It will now head for consideration in the House, where members rejected similar proposals during the regular session. Senators passed Senate Bill 1 by a 18-13 vote, with one Republican joining all Democrats in voting against the measure. The bill will likely face steep resistance in the House, where Democratic members and many rural Republicans have vehemently opposed such proposals. School choice programs, also called education savings accounts or vouchers, use public money to help pay for a child’s private schooling. “We must recognize that a one-size-fits-all approach doesn't fit the needs of our diverse student population,” said Sen. Brandon Creighton, R-Conroe, who authored SB 1 and estimated the proposal could serve about 60,000 students. Texas has about 5.5 million children in public schools. Public schools have failed the American people, especi...
Post a Comment
Read more