Saving money is the foundation of all financial success, including investing.

Having money saved is what provides the means for you to take advantage of situations, whether it's going back to college, starting a new business, or buying shares of stock when the market crashes. 

We know we should get into the habit of saving money.  As children, many of us had piggy banks given to us by our parents to encourage the habit of saving our money.  Were you a successful piggy bank saver, or did you rob the piggy bank every time the ice cream man came through the neighborhood? 

Whatever choice you made probably began to influence your financial habits, even though you were just a child. 

As we grew older, graduated from school, and got a job, we were told to "Pay Yourself First," or, as a popular internet website is named, "Pay the Pig First." 

Put simply, we should get into the habit of putting aside, or saving, a predetermined amount of money from our paychecks before anything else is spent.  Why?  How else can we form a "saving money" habit?  We first have to have money to save; so, paying yourself first is the easiest way to develop this habit. 

Does saving a few dollars really matter?  Even if you are committed to saving money, you may find yourself falling into the trap of spending an extra $5 here, or $13 there, thinking, "It's not that much. I'll never miss it." Depending upon your age, this could be a huge mistake.

One of the cornerstones of saving money is understanding the time value of money-that is, the concept that $1 today is more valuable than $1 a year from now. 

The reason for this is two-fold.

  • First, a dollar will probably buy fewer goods and services in the future due to the destructive force of inflation.
  • Second, if I have the dollar in my hand today, I can invest it and earn a return in the form of dividends, interest, or capital gains. 

The best money advice anyone can ever give you is to firmly establish this time value of money concept in your head.

The key to financial prosperity is realizing the potential value of every dollar that comes into your hands. In fact, I think of cash as a seed-you can either eat it (spend it) or invest it (sow it).

As you continue to pay yourself first, your savings should begin to accumulate and, before you know it, you will acquire a small nest egg.  Now, it's decision time.  Is the nest egg making more money for you or is it simply accumulating each paycheck?  Most likely, the answer is that it's simply accumulating. 

There's nothing wrong with accumulating money, but you can do better than accumulate. 

What can you do?  You can invest your nest egg or part of it-whichever makes you feel best about distributing your accumulated wealth.

If you are a novice investor, you need to educate yourself about what the financial world has to offer you in the form of investments.  Once you decide where you want to put your nest egg to earn additional money, you need to know how much you can expect as a return or profit.  How much interest can you expect to make above and beyond your initial investment and the time period your money will be used (the maturity date). 

Is this a one year, two year, or beyond commitment whereby you can't touch your investment?  What happens if you decide to withdraw whatever funds you have before the maturity date?

There is one golden rule of investing that you should always follow: Never invest money you cannot afford to lose.

Investing is not saving! 

There is nothing that says your investments will always make money for you; so, be prepared to lose money as well.  It's a game requiring knowledge and skill, knowing when to get in and when to get out. 

But, there is a natural human tendency to want to overreach, to put more money in than you can afford, and go for a huge payout. In fact, this trait tends to be magnified the more desperate someone is for money because they hope that hitting the jackpot will make all of their problems go away (you see a lot of people below the poverty line playing the lottery but not very many executives).

My best advice is to develop a habit of saving money and accumulate a nest egg. 

Once you reach that point, educate yourself and do a lot of research regarding the field of investments. 

When you feel you are ready, jump in. I wish you luck!

Kimberly Johns, Debt Management Plan Customer with Leading Provider of Debt Relief, CareOne Services, Inc.Kimberly Johns

Kimberly is enrolled on the CareOne Debt Management Plan (DMP). Kimberly is very active in the Community Forums, some of you may recognize her Community user name; Tiquie. Recently retired, Kim shares how she and her husband manage the financial challenges of living on a fixed income in their home state of Illinois. The John's have found some really creative and fun ways to offset the limitations of a retirement income. Kimberly generously shares smart and tested tips in her A Straight Talk on Debt blogs! Compensated Blogger for CareOne Debt Relief Services.