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How did you save your first $50,000? Any tips for sharing?

Question:
How did you save your first $50,000? Any tips for sharing?

Answer:
I put money into a 401(k), 6% of my salary (it's all I could afford), When I left the company, I rolled it into an IRA with Fidelity ($6,000), and the first 10 years I had it in mutual funds. After 10 years, since I felt comfortable with the market, I started buying and selling stock. Fast forward 20 years, the $6k is now worth over $100k.

Tips: Have your savings taken out of your paycheck or your checking account automatically - you'll learn to live without the extra money because it won't be there for you to see. All major brokerage houses will let you set up an automated direct deposit.

If you don't know the market, just buy one no load mutual fund that mirrors the market (Vanguard has some with very low fees, as does TIAA-CREF).

Put a little money in on a consistent basis - this is called "dollar cost averaging", where sometimes you buy high and sometimes you buy low, but it makes for a very consistent price.

Don't buy stock options or individual stocks until you really understand the market. Don't subscribe to any of those expensive "we'll tell you where to invest" - their "performance" numbers are often based on what they do before they publish to the world (and impact the market). Don't take hot stock tips, or try to time the market.

If you want to invest in stocks, you can go to www.dripinvestor.com, where you can find stocks you can buy where they re-invest the dividends. I bought $250 of Exxon Mobil in 1992, and recently sold it for $6000, no additional money ever put in. Look for stocks with dividends, because even if the principal goes down you'll make money on the dividends every year.

Don't move your money around often - Once a year, check it out, and you can always call the mutual fund company you're with and talk about what you want to do - Don't try to "diversify" unless you have money to spread evenly - For example, after $5,000 is in the Vanguard fund, you can take the next $5,000 and put it in a differnt type of fund (bond, real estate, international).

Don't confuse multiple funds with diversifying. Check the style - large cap, small cap, mid cap, value versus growth. The market favors one kind over another at various times, but if you're in 4 mutual funds all the same style, yo're still banking on the same set of stocks.

In the short run, consider GMAC Demand Notes - they pay 6%, you can pull your money out and write checks on it (if you have the discipline, you should sweep all of your unused money in there before you pay bills, you can make money on the float).

Good luck,