Personal Finance in Your 20s & 30s For Dummies, 3rd Edition

Chapter 12

Portfolios for a Purpose

IN THIS CHAPTER

Choosing how to invest nonretirement account money

Investing inside retirement accounts

Paying for education costs

In Chapter 10, I discuss the principles of intelligent investing. This chapter takes you a step further to help you match the best investments for your specific goals.

Before You Begin Investing

Before you jump into the investing waters, consider the following two often-overlooked ways to put your money to work and earn high returns without much risk:

• Pay off high-interest debt. If, for example, you have credit-card debt outstanding at 14 percent interest, paying off that loan is the same as putting your money to work in an investment with a sure 14 percent annual return. Remember that the interest on consumer debt isn’t tax-deductible, so you would actually need to earn more than 14 percent investing your money elsewhere in order to net 14 percent after paying taxes.
• Fund retirement accounts. If you work for a company that offers a retirement savings plan such as a 401(k), consider contributing as much as you can manage. If you earn self-employment income, consider an SEP-IRA plan. (I discuss the tax benefits ...