If you only had $17,800 in income, what investments would you recommend?
Answers | 2
If you wait and pay all of your bills first and then see if there is anything left over to save or invest, there may not be anything. It takes a lot of discipline, but learning to pay yourself FIRST is really what matters over the long haul. If you start saving & investing early enough in life, and can learn to live off of 70%/80%/90% of your income (I have no idea how old you are or how long you have to allow your money to make babies), you can set aside enough to retire on - no matter what your income level is.
I would first make sure that you have saved at least 6 months' worth of income and set that aside in a money market account (an MMA will allow you to earn a better interest rate while still remaining liquid in case of an emergency). Then (and only then) should you consider risking any of your money.
Use the rule of 100. That is, whatever your current age is, invest that number in higher yield (aka riskier) investments and then subtract your age from 100. Whatever the remaining balance is should be invested in vehicles that do not allow for loss of principal. For example, I'm 45. I have 45% of my investments in stocks and mutual funds (higher yield potential, but that comes with a risk of loss), and the remaining 55% in annuities (which provide upside potential, but have downside protection). As I age, the percentage in stocks and mutual funds will decrease as I shift more of my investment income over into vehicles with little to no risk. Make sense?
Hope this helps!