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Getting the Money Together

Accumulating and allocating investment money is a key part of your plan.

With your financial plan in hand, you can turn your attention to getting the money together to make the first investment, and the next one and the ones after that.

You don't need much money to open an investment account. And once it's opened you can add to it easily, often as little as $50 at a time. You can have money directly deposited from your paycheck or transferred from your checking account, or write a check yourself. The sooner you start and the more regularly you add, the faster the account will grow.

KEEP IT SEPARATE If you're building an investment account, it makes a lot of sense to keep it separate from your checking account. It will pay off - even if it means another piece of paper to keep track of - because you won't be as tempted to spend your investment money on everyday expenses.


Minimum opening deposit	One of the factors you may consider in choosing an account that you'll use to accumulate investment principal is its minimum opening deposit. Some accounts may require as little as $10 while others have a floor of $1,000 or more. Each institution that offers such accounts sets its own minimums.

Minimum balance	Some accounts require that you maintain a minimum balance to be eligible for earnings or avoid maintenance fees, or both. If you plan to be moving money in and out of your account, you may want to choose one with the most flexible minimum balance rules.

Costs and fees	Most investment accounts have a range of fees and expenses that are explained in detail in the account materials the sponsor provides. Some fees are asset-based, calculated as a percentage of your account value, while others are transaction fees or penalty fees.

Average return	If you're using your account primarily to accumulate assets you intend to invest rather than as an investment itself, you may not be concerned with the return on investment the account provides. But the longer you leave money in the account, the more important potential return may be.

Insurance	Unlike bank savings accounts, investment accounts are not insured against losses and do not guarantee a return. When you withdraw, your account may be worth more or less than the amount you deposited.

REINVESTING YOUR EARNINGSOne of the most reliable ways to build your assets is to reinvest the money you earn from the investments you already have. You do that automatically with tax-deferred accounts like variable annuities, and you may be able to reinvest directly in stocks and mutual funds you hold in taxable accounts. What you arrange to do is participate in the company's reinvestment plan.

With bonds and some stocks, the interest or dividends you earn is paid to you (or your brokerage account) directly, and you have to decide how to invest it. That's where having a financial plan can make a big difference: If you know what you want to do next, you can act promptly - for example, putting the earnings into an investment account where you accumulate money for a bigger purchase.

VARIABLE ANNUITIES
With many variable annuities, you can allocate a specific percentage of your purchase to each of your separate account funds at the time you buy. For example, if you invest $40,000 and have selected four funds, you might buy $10,000 worth of accumulation units in each of the funds. Or, if you invest $400 a month, you would direct that $100 go into each of the funds.

MUTUAL FUNDS

STOCKS
You can buy stock through a brokerage account or, in some cases, directly from the company if you participate in a direct purchase plan (DPP) or dividend reinvestment plan (DRIP). Prices range from less than $1 per share to more than $100 a share. You can sell stocks you own and buy others as part of a strategic plan. Stocks may provide growth, income, or both. But earnings are not guaranteed.

BONDS
Bonds generally cost $1,000 each and may require a minimum purchase of $10,000 or more. Once you have invested, you can use money from maturing bonds to buy new ones. Bonds generally provide income, but the income and principal are not guaranteed on most bonds. The major exceptions are US Treasury issues, which you can buy in $100 increments and which guarantee timely payment of interest and repayment of principal.

CDS
You can purchase a certificate of deposit (CD) with as little as $250 and earn a guaranteed rate of interest. You can invest for periods of a few months to five years, and decide either to withdraw your money at the end of the term or reinvest. CDs are income, not growth, investments. CDs you buy at a bank are FDIC-insured up to $250,000.

THE ACCUMULATION PHASE
You can build an investment account from money you're earning by adding a certain amount every paycheck, or every month.

If you stick to the guideline of investing 10% of your annual salary, you're talking about $250 a month if you're earning $30,000 a year, and $1,042 a month if you're earning $125,000 a year. You can find the monthly amount you're aiming for by dividing your annual salary by 12 and multiplying by 10%.

If you stick to your plan, you can deposit a substantial base on which potential earnings can accumulate.

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