resources
Pay yourself first. It’s the rock solid foundation of every wealth building strategy, and the most
often compromised. Why be consistent? Because it works! Just as you allocate dollars to pay
your bills and support your lifestyle, make it mandatory to sock away a portion of your income
for savings and investments—as much as 15%, in addition to the money you invest in your employer’s 401(k)
or other company-sponsored retirement plans. Also, and most important, once you’ve targeted these funds for
your savings and investment program, leave it there. Allowing it to grow is the whole point.
Take these steps to develop a sound savings
and investment plan:
Set specific goals
First, establish why you are saving and investing. Do you want to retire early? Are you seeking to
finance a child’s education? Do you want to buy a home? Once you know the answers, create a plan
in which each goal has a time frame and a dollar amount. Finally, before you rush out to open sev-eral
accounts, categorize your needs into short-, intermediate- and long-term objectives.
Calculate the amount you need to save
Make sure you have put aside three to six months of income to cover emergencies such as the
loss of a job or catastrophic illness. As you look at short- or long-range priorities, understand
current expenses versus those based on future needs. For example, figure out how much you
need for retirement by projecting your annual income and living expenses (see worksheet at
the end of this booklet).
Use direct deposit to build up savings
Find out if your employer can direct a portion of your paycheck to your savings account. By
applying the strategy of paying yourself first, you allocate critical funds before dividing your
paycheck for bills and other living expenses.
Get professional help
As you map out your financial goals and identify vehicles to achieve them, you don’t have to
go it alone. It’s a good idea to consult a financial planner. He or she can assist you in taking an
objective look at your financial position and developing a comprehensive plan to help you
achieve goals.
To Save And Invest 10% To 15% Of My After-tax
PRINCIPLE NO. 2
Websites:
www.blackenterprise.com
www.asec.org (American Savings Education Council)
www.ebri.org (Employee Benefit Research Institute)
www.ici.org/funds/inv (Investment Company Institute)
www.fpa.net (The Financial Planning Association/Institute
of Certified Financial Planners)
Books:
Think & Grow Rich: A Black Choice
by Dennis Kimbro & Napoleon Hill
The Truth About Money
by Ric Edelman
Pay Yourself First: The African American Guide
to Financial Success and Security
by Jesse B. Brown
Goals Amount Needed Time Frame
1 $
2 $
3 $
4 $
5 $
10
P
Declaration of Financial Empowerment
steps


PRINCIPLE no.2
11
Futures/Options
Commodities
Precious Metals
High
Low
Risk Return
Low
Real Estate
Puts/Calls
Collectibles
Speculative Stocks
Junk Bonds
Aggressive Growth Mutual Funds
Small Cap Mutual Funds
Growth Stocks
Growth Mutual Funds
Blue Chips
Municipal Bonds
Corporate Bonds
Money Market Accounts
Bond Mutual Funds
Balanced Mutual Funds
Preferred Stock
Convertibles
1
Savings Accounts/Checking Accounts
U.S. Government Securities
U.S. Savings Bonds
Certificates of Deposit
Gauge the risk of potential savings and investment vehicles
Before you start your savings and investment program, you should evaluate your investment
risk and determine how to balance your portfolio. One technique is to use the pyramid
model, which has six basic tiers.
First Tier: The base of the pyramid is the foundation of your portfolio and is designed to preserve
capital. This level consists of the lowest risk and lowest return vehicles, such as U.S. Treasury
securities, checking and savings accounts, and U.S. Savings Bonds.
Second Tier: This level offers low-risk and low-return investments such as money market
accounts, fixed-income mutual funds, and high-grade corporate bonds.
Third Tier: This level includes relatively low-risk investments such as balanced mutual
funds, which invest in both stocks and bonds, and convertibles, which are bonds that can
be converted into stock and preferred stock and function like fixed-income securities
because they consistently pay dividends.
Fourth Tier: This level provides investors with intermediate risk and includes quality growth
stocks or mutual funds as well as blue chip shares of large, established companies.
Fifth Tier: This tier is designed for seasoned investors with enough money to handle occasional
downturns. The risky investments on this level include real estate, junk bonds, aggressive
growth funds, and collectibles.
Sixth Tier: The final tier is geared for sophisticated investors who have the deep pockets to
invest in high-risk, high-return vehicles such as options, commodities, and precious metals.
Investment Pyramid
2
3
4
5
6
Income Income