You worked for your money, keep it working for you

Published 12:00 am Sunday, September 6, 2009

Labor Day is upon us. We honor the contributions of working men and women — in other words, people just like you. Of course, it doesn’t have to be Labor Day for you to be aware that you work hard for your money — and you’d like to know that your money is working just as hard for you.

How can you keep your money employed? Consider these suggestions:

4 Keep your money working for the future. The financial markets have been through some difficult times over the past two years. As a result, many people pulled money from their investments and stuck it in savings accounts — some of which paid around 1 percent interest — or Treasury securities — which may have paid even less. While the need to feel “secure” is understandable, it can also be detrimental to long-term financial goals, such as a comfortable retirement. To help achieve these goals, try to own an array of quality investments that are appropriate for your specific objectives, risk tolerance and time horizon.

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4 Don’t interrupt your money while it’s working. You want your investments working to help you achieve your long-term goals. But this work can be interrupted by short-term needs, such as expensive car repairs, large doctor’s bills or costly new appliances. To avoid dipping into your investments — and thereby reducing their growth potential — to pay for these needs, you’ll want to establish an emergency fund containing six to 12 months’ worth of living expenses, kept in a liquid account. Also, if you know you’re going to need a large amount of money within the next few years — perhaps for college tuition, a wedding or a long vacation — you may want to remove some of your investments from the ups-and-downs of the financial markets and place the money in vehicles that can protect your principal.

4 Have your money work for you — not your creditors. Too much debt — specifically, too much of the wrong types of debt — is both a cause and a consequence of the economic malaise we’ve experienced. Try to reduce or consolidate your debts. For example, despite all the talk about a “credit freeze,” many reputable lenders are eager to help qualified borrowers refinance their mortgages. And since mortgage rates are still low, a refinance could free up hundreds of dollars per month for you — money that you could put to work investing for your long-term goals.

Tommy mcdonald is a financial advisor at Edward Jones in Natchez. He can be reached at 601-446-5666.