Wednesday, July 20, 2011

Investing for Those With Limited Money

When I write about investing, I generally try to make it applicable to a variety of people.  Everyone's situation is different, but I like to offer advice that could potentially be helpful to anyone.  So often, I will read or listen to something on investing and it seems to apply to people with lots of money.  I really find this to be the case when the topic comes up about investing overseas.  To buy real estate outside of your country and to set up a foreign bank account, you usually need a substantial amount of money to make it worth it.

The reality is that most people do not have a lot of money.  Even the average middle class person living in the U.S. does not have a lot of money, particularly outside of real estate and retirement funds.  So for this post, I would like to offer some advice for people with a real limited amount of money.

First, although I believe that price inflation will get worse due to the government's reckless policies of massive spending and massive debt, I think it is important to have some liquidity in the form of money.  Whether it is cash, a checking account, a savings account, or whatever, it is important to have some money available for emergency expenses.  If you don't have at least a couple of thousand dollars to your name, there is no point on reading up on investment advice unless it is just an interesting topic to you.  Because if you don't have much money to your name, then investing it well won't make much of a difference.

If you have almost no money, you should not be worried about investing.  You should be worried about increasing your income, paying down debt, and spending less.

If you have a little money saved up and don't know where to start, I have a couple of simple recommendations.  First, you could buy one-ounce silver eagle coins.  You can check with your local coin dealer or look on the internet.  You can buy these on Ebay too.  With the current price of silver, you should be able to buy a one ounce coin for just over $40.

My second recommendation, and perhaps better one, is something that I recommend for everyone to do if you can.  If you have some extra space where you live, buy things that you need that don't spoil.  You can buy certain grocery items like bottled water and canned foods.  You can buy soap, toothpaste, shampoo, razor blades, toilet paper, kleenex, paper towels, etc.  Make a list of things that you use.  You obviously can't stock up on milk, but there are many things that you can buy that will last for a year or more.

When you go shopping, look for those particular things that are on sale.  If it is "buy one get one free" or if there is any kind of a sale from the regular price, buy it.  Buy enough to last you at least a couple of months or more.

When it comes to storage, be creative.  Look in your closets and see if there is any room up high.  You can always add some shelving.  If you have limited space, then you might want to stock up on razor blades and toothpaste before you start buying bulkier items like paper towel.

So why do I recommend this strategy?  Because things aren't going to get any cheaper.  The Fed has tripled the monetary base in the last three years.  There is potential for huge price inflation.  If this analysis turns out to be wrong, then the worst case scenario is that you use up the items that you bought. As long as you aren't buying an electronic item, then there is a very good chance that the price of the product won't be any lower one year from now.

You can start this strategy by stocking up on some 100-watt light bulbs.  Our limited, constitutional, federal government decided to ban these under the conservative presidency of George W. Bush.  The ban will go into effect in less than 6 months.

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