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1. Pay off high-cost debt.
The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example, if you have a $3,000 credit card balance with an interest rate of 19.8%, and you make only the minimum monthly payment, you could end up paying an additional $10,000 in interest on top of what was already owed. Visit www.debtadvice.org for more information.
2. Buy a home and pay off the mortgage before you retire.
The largest asset of most middle-income families is their home equity. Once these families have made their last mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed on in emergencies or converted into cash through sale of the home.
3. Participate in a work-related retirement program.
Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401(k) plan. If they did participate, with a dollar-for-dollar match, they would receive an annual yield of greater than 100% on their investment. Contact www.asec.org for more savings assistance.
4. Save monthly – outside of work – through an automated transfer from checking to savings.
These savings will provide funds for emergencies, home purchase, school tuition or even retirement. Almost all banking institutions will, on request, automatically transfer funds monthly from your checking account to a savings account, U.S. Savings Bond or stock mutual fund. What you don’t see, you will probably not miss.
5. Earn up to 4% or more on many CDs (certificates of deposit) or U.S. Savings Bonds.
Most CDs from a bank or credit union and Series EE and Series I Savings Bond, currently pay between 3% and 4%. With a 4% yield, your money will double in 18 years! Visit www.treasurydirect.gov/indiv/products/products.htm for more information.
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