Financial Goals

• Financial goals provide a sense of purpose to your budget and investment strategy. Common financial goals often include establishing resources to provide for a first-time home purchase, college education and comfortable retirement lifestyle. You will further define each goal according to time frame and total costs. Perhaps you will need to save up $2 million to retire to a Montana ranch within the next 15 years.
  
  

Projections

• You will pull up an online financial calculator to make savings projections and coordinate strategy. The financial calculator allows you to toggle through regular savings, rates of return and future value estimates. After using the calculator, you will be able to determine the amount of money you should be investing each month at a projected rate of return to achieve your goals. The projected rate of return helps you to weigh risks versus rewards. You should be taking on less risk with your investments as you age and retirement nears. To do so, you would put more money into bonds, which are less volatile than stock market investments. Bonds are credit securities, where you collect interest on loan principal. Stocks are ownership stakes that can fluctuate dramatically in value alongside corporate profits.
  
  

Retirement Plans

• You should make it a priority to put money into retirement plans to compound long-term wealth. 401k, traditional IRA and Roth IRA retirement plans allow for tax deferral, which means you will not owe taxes on investment income and capital gains as they occur within the account. 401k and traditional IRA plans allow for tax-deductible contributions, but distributions from these accounts will be taxed as ordinary income. Alternatively, you put after-tax money into a Roth IRA, which allows for tax-free withdrawals at retirement. Early retirement plan withdrawals, however, are subject to a 10-percent additional tax penalty if you take money out before age 59 1/2.
  
  

Mutual Funds

• As a beginning investor, you can purchase mutual funds for your retirement plans or directly through fund companies for as little as $50 each month. One mutual fund share carries rights to a larger pool of dozens of different investments, which are selected by a money manager. Mutual fund shares are therefore ideal for smaller investors because they provide for diversification and professional money management.
  
  

Direct Investment Plan

• You can also purchase shares of stock directly from major corporations for as little as $50 each month. As a smaller investor, you can bypass expensive brokerage fees and commissions through a direct investment plan. For enrollment forms, you would visit a corporation's official website and click on the investor relations tab.