Money and Life: Some Points Worth Remembering
Humberto Cruz

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Money is only a tool. It's valuable because it lets you buy the things you need for you and your family, and because having enough money can give you the time and freedom to pursue the activities and passions that give your life fulfillment. But merely accumulating money to show off your wealth serves no purpose.

Therefore, take the time to think through and discuss with your spouse or partner, if you have one, what you want out of life, individually and as a couple.

Once you know, it will be much easier to estimate how much money you'll need to meet your goals.

Be in control. Track faithfully how much you spend and for what. That way you'll know how much you're spending on needs and wants (or even outright luxuries) and perhaps how much money you're wasting on things that are not that important.

Put something away every time you get paid. This is called "paying yourself first.'' Do it automatically, such as having a portion of your paycheck deposited directly into a savings or investment account.

Before you begin investing, however, build an emergency savings reserve to cover at least six months of living expenses if you are working, and a year if you're not. Keep this money in a safe and easily accessible place, such as a savings or money market account.

Protect yourself against catastrophic losses with adequate insurance, including health, homeowners, auto and, if you have people who depend upon you financially, life insurance.

Once you have an emergency cushion and are adequately insured, invest regularly. Dollar-cost-averaging into stock funds -- that is, investing a set amount at regular intervals, such as $250 a month -- is an excellent strategy and habit.

Knowing how much money you'll need to meet your goals will in turn allow you to calculate how much you need to save every year, and how high an investment return you need. This is extremely important. If you know you can meet your goals with a 5 percent return, for example, you won't need to incur the risk of investing for a higher return.

Keep your investments simple and diversified, and consistent with your risk tolerance and the return you need.

NEVER invest in something you don't understand. A well-diversified portfolio of low-cost stock and bond funds (or other high-qualify fixed income investments), rebalanced regularly, gives you good odds of achieving satisfactory long-term returns without undue risk.

If you hire an investment adviser, you're still responsible for checking his/her credential and making sure the adviser's recommendations are consistent with your goals, risk tolerance and the investment return you need. If you don't understand what you adviser is recommending, keep asking until you do. If your adviser can't communicate in plain English, get another adviser.

Use credit cards to your advantage. Never use a credit card to buy something you would not have bought -- or could not have afforded to buy -- if you didn't have the card. Always pay your balance in full each month.

Shop around for credit cards and bank accounts.

Don't pay unnecessary fees.

Take advantage of technology but don't become a slave to it. Be careful with technology-related purchases that require a monthly subscription. You don't have to replace an electronic gadget every time a new model or feature comes out.

Enjoy life's simple pleasures -- a walk in the park, playing board games with the family, a free community concert or art fair. You can have a lot of fun without spending a lot of money.

Humberto Cruz has retired after 20 years of writing the Savings Game column. Here are some key points he made over the years that he felt were worth repeating

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Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio

Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Financial Goals

Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire

The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living

Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back