1. Don't go with strangers.
As a college student in the 1980s, Eric Tyson decided to invest a portion of his savings in precious metals. He turned to a company he had seen advertised in some prestigious publications. "My mistake was in assuming they were a reputable firm," says Tyson, author of "Personal Finance for Dummies."
<TABLE cellSpacing=0 cellPadding=0 width=294 align=left border=0><TBODY><TR><TD colSpan=100><!--and thisponsor <> "fed"--><CENTER><!--Continued below
--></CENTER></TD></TR></TBODY></TABLE>
"I didn't do much, if any, due diligence on the firm," Tyson recalls. Instead, he invested $2,000, "which for a college student is a lot of money." Long story short, he says, "The company was engaged in big-time fraud. I never got the bullion. I never got my money back. The firm basically went under."
About the same time Tyson began to suspect something was wrong, a flurry of press stories confirmed his worst fears. He kept working the phones, trying to get back his money to no avail.
"The sad thing was that there were some investors, older people, who put a good chunk of their life savings" into the investments, Tyson says. For them, "it was a catastrophic event."
What Tyson recouped: "A tax write-off and a great learning experience," he says. "Investing in precious metals is not inherently a bad thing to do." The main thing, Tyson says, is to remember "the importance of doing due diligence on companies you do business with."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
Chris Farrell, economics editor of the nationally syndicated public radio program "Sound Money" </TD></TR></TBODY></TABLE>
2. Start early.
If you procrastinate about your retirement savings plans, you're not alone, says Chris Farrell, economics editor of the nationally syndicated public radio program "Sound Money."
"I really didn't start saving for retirement systematically until later in my life," says Farrell, who also wrote "Right on the Money! Taking Control of Your Personal Finances." While many of the companies Farrell worked for offered retirement plans, the matching money was only vested after 10 years or so.
For Farrell, like many young professionals who were changing jobs as they moved up the career ladder, that effectively eliminated the matching benefit and made the programs much less attractive.
"I didn't get anything from it, and I knew I wasn't going to get anything from it," he recalls.
Consequently, he didn't make the investment he should have. "The dumb thing is that I could have opened up an IRA," he says.
Unfortunately, putting off saving for retirement is common "for people of my generation," he says. These are the folks who, until 20 years ago, were more concerned with getting the highest CD yields than investing in 401(k)s.
It's also never too late to save smart, Farrell says. He now has several retirement accounts, including a SEP and a 403(b). "You can't beat up on yourself for what you didn't do," Farrell says. "You just have to take maximum advantage of plans going forward."
<TABLE cellPadding=5 width=199 align=right><TBODY><TR><TD height=8></TD></TR><TR><TD>
Michelle Singletary, syndicated personal finance columnist</TD></TR></TBODY></TABLE>
3. Do your homework.
Nationally syndicated personal finance columnist Michelle Singletary was fresh out of college when she was first offered a 401(k) retirement plan.
At the time, she recalls, "I knew nothing about stocks and bonds."
Instead of doing her own research or talking with experts the plan administrators provided, she sought advice from a colleague. In his 40s and conservative by nature, her co-worker told her to skip the stocks and put all her money into bonds.
"I could just kick myself," she says.
"I wish I had just taken the time to investigate and learn about the market," recalls Singletary, author of "Spend Well, Live Rich: How to Get What You Want with the Money You Have." Her friend's advice was right on the mark for him. But different life stages require different investing strategies.
The solution: Over the years as Singletary learned about stocks, bonds and savings, she changed her approach.
Her advice: "Become knowledgeable," she says. And, "Get advice from people who know what they are doing." Many plans have phone numbers so that you can speak with professionals, she says. "You don't have to pay for it. Just ask human resources, 'Who can I talk to?'"
Turning to friends, co-workers and relatives for financial advice is a common mistake. "A lot of people do that," she says.
4. Don't put all your eggs in one basket.
As a young wife and mother, Elizabeth Warren decided to get her law degree. "We had it budgeted to the penny," recalls Warren, who co-authored "All Your Worth: The Ultimate Lifetime Money Plan," with her daughter, Amelia Warren Tyagi.
To pay the tuition, the couple decided to use savings invested in stocks. "My husband's company gave us a discount for buying company stock," she says. For that reason, all of their stock, and a good portion of their savings, was invested in IBM.
<TABLE cellSpacing=0 cellPadding=0 width=294 align=left border=0><TBODY><TR><TD colSpan=100><!--and thisponsor <> "fed"--><CENTER><!--Continued below
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Then "just before the tuition was due, the stock started dropping."
When she cashed out, there wasn't even enough to pay for a second semester. "I had to borrow and keep borrowing," says Warren.
"The summer after my second year in law school I had a job on Wall Street for three months. I literally took every paycheck to the bank and paid that loan," she says.
Simultaneously, the family slashed spending. For two years, "I didn't buy a single stitch of new clothing, not even socks," she says. "If it wasn't in my drawer, I didn't wear it."
Warren, now a professor at Harvard Law School, learned three valuable lessons. First, diversify your savings. "All of my stock investments are now in mutual funds," she says.
Second, if you are using stocks to pay for something specific, like tuition or a new home, "get out of the market well in advance of the time you'll need the money," she says. "I learned the lesson that you can't count on any price if you have to sell quickly in the stock market."
And third, don't invest the bulk of your savings in the company where you or your spouse works. "Post-Enron," she says, "we all know what a terrible idea that is."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
Ric Edelman, author of "The Truth About Money."</TD></TR></TBODY></TABLE>
5. Think ahead.
"When I quit my first job, right out of college, they asked me what I wanted to do with that retirement account," says financial adviser Ric Edelman, author of "The Truth About Money." "It was 800-and-some dollars," he says. "I told them cash it in and send me the check. That was obviously very foolish."
Twenty-three years later, "that money would be worth many thousands of dollars," he says. While he doesn't remember how he spent it, he does recall that taxes took more than half.
Edelman's advice to anyone in that same situation now: "Roll that money over into an IRA and invest it in a diversified stock fund."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
Dave Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness"</TD></TR></TBODY></TABLE>
6. Never go for the fast buck.
In the 1980s, Dave Ramsey made a fortune buying and selling real estate. But his attitude got him into financial trouble and resulted in bankruptcy, he says.
"I was in get-rich-quick mode," Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness," recalls. "What put me there? Immaturity, a touch of greed and a little arrogance."
When two of his financing banks were sold, the new owners called in the loans -- and that's when the "house of cards" collapsed, Ramsey says. He held off creditors for two years, sold everything and sliced what he owed from $3 million to $300,000. But he still ended up in bankruptcy.
But he also learned some important lessons. First, there's no such thing as a fast buck. His advice to others is what he learned and used to recover his own financial life: Play it smart, build slowly and focus on the long haul.
Almost equally important is to deep-six the dependence on credit. "I never borrow money under any circumstances," says Ramsey. "No car loan, no house loan, no credit cards." His reasoning: You are risking security and stability for instant gratification.
His favorite investments these days is paid-for real estate and mutual funds. "I would rather own 10 paid-for properties than 150 leveraged for cash," he says.
"No good food comes out of the microwave, it all comes out of the Crock-Pot," Ramsey says. "That's how wealth building works, and that's how success works."
As a college student in the 1980s, Eric Tyson decided to invest a portion of his savings in precious metals. He turned to a company he had seen advertised in some prestigious publications. "My mistake was in assuming they were a reputable firm," says Tyson, author of "Personal Finance for Dummies."
<TABLE cellSpacing=0 cellPadding=0 width=294 align=left border=0><TBODY><TR><TD colSpan=100><!--and thisponsor <> "fed"--><CENTER><!--Continued below
--></CENTER></TD></TR></TBODY></TABLE>
"I didn't do much, if any, due diligence on the firm," Tyson recalls. Instead, he invested $2,000, "which for a college student is a lot of money." Long story short, he says, "The company was engaged in big-time fraud. I never got the bullion. I never got my money back. The firm basically went under."
About the same time Tyson began to suspect something was wrong, a flurry of press stories confirmed his worst fears. He kept working the phones, trying to get back his money to no avail.
"The sad thing was that there were some investors, older people, who put a good chunk of their life savings" into the investments, Tyson says. For them, "it was a catastrophic event."
What Tyson recouped: "A tax write-off and a great learning experience," he says. "Investing in precious metals is not inherently a bad thing to do." The main thing, Tyson says, is to remember "the importance of doing due diligence on companies you do business with."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
2. Start early.
If you procrastinate about your retirement savings plans, you're not alone, says Chris Farrell, economics editor of the nationally syndicated public radio program "Sound Money."
"I really didn't start saving for retirement systematically until later in my life," says Farrell, who also wrote "Right on the Money! Taking Control of Your Personal Finances." While many of the companies Farrell worked for offered retirement plans, the matching money was only vested after 10 years or so.
For Farrell, like many young professionals who were changing jobs as they moved up the career ladder, that effectively eliminated the matching benefit and made the programs much less attractive.
"I didn't get anything from it, and I knew I wasn't going to get anything from it," he recalls.
Consequently, he didn't make the investment he should have. "The dumb thing is that I could have opened up an IRA," he says.
Unfortunately, putting off saving for retirement is common "for people of my generation," he says. These are the folks who, until 20 years ago, were more concerned with getting the highest CD yields than investing in 401(k)s.
It's also never too late to save smart, Farrell says. He now has several retirement accounts, including a SEP and a 403(b). "You can't beat up on yourself for what you didn't do," Farrell says. "You just have to take maximum advantage of plans going forward."
<TABLE cellPadding=5 width=199 align=right><TBODY><TR><TD height=8></TD></TR><TR><TD>
3. Do your homework.
Nationally syndicated personal finance columnist Michelle Singletary was fresh out of college when she was first offered a 401(k) retirement plan.
At the time, she recalls, "I knew nothing about stocks and bonds."
Instead of doing her own research or talking with experts the plan administrators provided, she sought advice from a colleague. In his 40s and conservative by nature, her co-worker told her to skip the stocks and put all her money into bonds.
"I could just kick myself," she says.
"I wish I had just taken the time to investigate and learn about the market," recalls Singletary, author of "Spend Well, Live Rich: How to Get What You Want with the Money You Have." Her friend's advice was right on the mark for him. But different life stages require different investing strategies.
The solution: Over the years as Singletary learned about stocks, bonds and savings, she changed her approach.
Her advice: "Become knowledgeable," she says. And, "Get advice from people who know what they are doing." Many plans have phone numbers so that you can speak with professionals, she says. "You don't have to pay for it. Just ask human resources, 'Who can I talk to?'"
Turning to friends, co-workers and relatives for financial advice is a common mistake. "A lot of people do that," she says.
4. Don't put all your eggs in one basket.
As a young wife and mother, Elizabeth Warren decided to get her law degree. "We had it budgeted to the penny," recalls Warren, who co-authored "All Your Worth: The Ultimate Lifetime Money Plan," with her daughter, Amelia Warren Tyagi.
To pay the tuition, the couple decided to use savings invested in stocks. "My husband's company gave us a discount for buying company stock," she says. For that reason, all of their stock, and a good portion of their savings, was invested in IBM.
<TABLE cellSpacing=0 cellPadding=0 width=294 align=left border=0><TBODY><TR><TD colSpan=100><!--and thisponsor <> "fed"--><CENTER><!--Continued below
--><TABLE cellSpacing=0 cellPadding=0 border=0><TBODY><TR><TD vAlign=top align=middle><CENTER>
</CENTER><SCRIPT language=JavaScript><!--var fs = "/";var sc1 = "pt";rand = Math.round(Math.random() * 100000000);try{survey;}catch(er){survey="";}var sline = "<scri"+sc1+" language='JavaScript1.1' SRC="http://adsrv.bankrate.com/jserver/site=brm/parent=BRM/aamsz=island/position=/area=advice/subprod=/page=story/state=/city=/Keyword=/scuid="+ survey +"/acc_random=" + rand + "height="250' width='250'><"+fs+"scri"+sc1+">";document.write(sline);//--></SCRIPT><SCRIPT language=JavaScript1.1 src="http://adsrv.bankrate.com/jserver/site=brm/parent=BRM/aamsz=island/position=/area=advice/subprod=/page=story/state=/city=/Keyword=/scuid=/acc_random=29795021height=" width="250" 250?></SCRIPT>
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Then "just before the tuition was due, the stock started dropping."
When she cashed out, there wasn't even enough to pay for a second semester. "I had to borrow and keep borrowing," says Warren.
"The summer after my second year in law school I had a job on Wall Street for three months. I literally took every paycheck to the bank and paid that loan," she says.
Simultaneously, the family slashed spending. For two years, "I didn't buy a single stitch of new clothing, not even socks," she says. "If it wasn't in my drawer, I didn't wear it."
Warren, now a professor at Harvard Law School, learned three valuable lessons. First, diversify your savings. "All of my stock investments are now in mutual funds," she says.
Second, if you are using stocks to pay for something specific, like tuition or a new home, "get out of the market well in advance of the time you'll need the money," she says. "I learned the lesson that you can't count on any price if you have to sell quickly in the stock market."
And third, don't invest the bulk of your savings in the company where you or your spouse works. "Post-Enron," she says, "we all know what a terrible idea that is."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
5. Think ahead.
"When I quit my first job, right out of college, they asked me what I wanted to do with that retirement account," says financial adviser Ric Edelman, author of "The Truth About Money." "It was 800-and-some dollars," he says. "I told them cash it in and send me the check. That was obviously very foolish."
Twenty-three years later, "that money would be worth many thousands of dollars," he says. While he doesn't remember how he spent it, he does recall that taxes took more than half.
Edelman's advice to anyone in that same situation now: "Roll that money over into an IRA and invest it in a diversified stock fund."
<TABLE cellPadding=5 width=199 align=left><TBODY><TR><TD height=8></TD></TR><TR><TD>
6. Never go for the fast buck.
In the 1980s, Dave Ramsey made a fortune buying and selling real estate. But his attitude got him into financial trouble and resulted in bankruptcy, he says.
"I was in get-rich-quick mode," Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness," recalls. "What put me there? Immaturity, a touch of greed and a little arrogance."
When two of his financing banks were sold, the new owners called in the loans -- and that's when the "house of cards" collapsed, Ramsey says. He held off creditors for two years, sold everything and sliced what he owed from $3 million to $300,000. But he still ended up in bankruptcy.
But he also learned some important lessons. First, there's no such thing as a fast buck. His advice to others is what he learned and used to recover his own financial life: Play it smart, build slowly and focus on the long haul.
Almost equally important is to deep-six the dependence on credit. "I never borrow money under any circumstances," says Ramsey. "No car loan, no house loan, no credit cards." His reasoning: You are risking security and stability for instant gratification.
His favorite investments these days is paid-for real estate and mutual funds. "I would rather own 10 paid-for properties than 150 leveraged for cash," he says.
"No good food comes out of the microwave, it all comes out of the Crock-Pot," Ramsey says. "That's how wealth building works, and that's how success works."
Dana Dratch is a freelance writer based in Atlanta.
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