Once you have started using our free budget plan for your household budget you will be creating leftover money to save and invest. The following information is designed as a basic plan to get you off to a good start on creating the wealth you want.

First let's do a quick definition. Saving is holding leftover money. Leftover money is money you have not spent. You must hold this money in order to save it. If it gets spent it is no longer your savings.

Investing is putting your money in a form which has the potential or near certainty of increasing the amount you start with through interest, dividends or price increase.

The first form of saving is to take your leftover money, convert it to cash or some other valuable and tangible form and put it under your mattress. This is not recommended. You will not earn interest on money under a mattress! The goal of saving is to make your money work for you by earning interest, dividends or growing in some form or other.

So we need to do something with our savings other than hold the money at home. This is where risk comes in. Anytime you give your money to someone to hold for you, there is an element of risk that it will not be returned.

This stands for Safety, Liquidity, Diversification and Yield. Safety means the amount of risk that is inherent in an investment. No-risk investments include bank or credit union accounts that are insured, certificates of deposit (CD) from the same and US Government issued bonds. These are perfectly safe as to the amount you invest. Safety also considers the value based upon the rate of interest paid. If you have a high paying form of investment and normal investment rates are lower, than the value is also higher. If normal rates or yields go up above what you are being paid, then the value of your investment will go down. This is called an interest rate risk and is inherent in every form of investment.

Liquidity means the ability to cash in the investment. Money market savings accounts at federally insured financial institutions are fairly liquid because you can get them anytime and most pay interest monthly. CD's are less liquid and depend on the length you purchased (maturity). They can be from one month out to 10 years or so. Government bonds can be purchased in maturities of one month to 30 years.

Diversification means not having all your money in one form. This also makes your investments safer. A small amount of savings can be in one insured or guaranteed account or form, but as your savings grow it is wise to split them up among several forms.

Yield means the amount you earn on the investment. Government bonds guarantee a certain amount of interest. Financial institutions guarantee an interest rate on CD's and usually have variable rates on savings accounts or money market accounts. Corporate stocks have no guarantee on interest or dividends or growth. When starting, stick with the accounts that are insured and have a proven track record of paying the highest rate in their class.

I recommend that you begin your investing of that leftover money with low risk investments. The lowest risks are investments guaranteed by the US Federal Government or insured by them. The risk of loss on these types of investments is virtually non-existent. So I recommend that your first savings be put into a bank or credit union savings account or money market account. As this grows you can invest in other higher earning sources. You can start by opening a good basic savings account that is federally insured. I really like and highly recommend ING DIRECT. They make saving money simple. Open your account online today and start earning a very high variable annual percentage yield with no fees and no minimums. Compare their rates with the CD rates at the bottom to see what a good deal this really is! And an account can be opened in less than 5 minutes online right now. It is one of the best, if not the best, savings accounts available.

Next your can put money into government savings bonds. The EE bond series and the "I" series are great investments. I prefer the "I" series because they pay a base interest rate plus an amount added for inflation. They start at $25 denomination and are a great way to start saving tax-free. You can learn more about these at TreasuryDirect.

When CD rates are high enough, you can consider putting some money into them. I wouldn't invest less than $1,000 in any one CD. I think $10,000 per CD is a good amount.

Once you have some money saved and earning interest, you should consider buying stocks of US corporations. Stock is a share of the ownership of the company. This has historically been the best way to grow your investments. There have been periods when stock prices overall have been down and certain companies have lost money for investors. It is a risky proposition. But one of the best ways to minimize this risk is to invest in mutual funds. This makes your money diversified over several companies and is a good long term investment option. You can learn a lot more about mutual funds at Morningstar.

However, I really prefer buying stock directly from the company issuing the stock. You can do this through the use of Dividend Re-Investment Plans (DRIPS). The cost is usually much lower than using a stock broker. And there are hundreds of really good, large US companies that offer these plans. Just buy stock from a company that produces a product or service that you like and is popular. If you notice that most of the store shelves are full of Proctor and Gamble products and you like their stuff, then buy P&G shares through their DRIP plan. The best place for information about these plans and listings of companies offering the plans is DripCentral. You can invest monthly with DRIP's and this is very advantageous. You will be doing what is called "dollar cost averaging". This means that over a long period of time, if the stock price tends to move upward, you will make more money. All stock investing should be for a long term. In other words, you will not need the money for several years (5 or more years I consider long term). If you will need the money quicker than that, consider money market funds, CD's or short term government bonds and mutual funds. Just remember that during any one period of time, say one or two years, stock prices can do down instead of up.

Here is what I recommend to new savers as a guide. It is only a guide and you should adjust it according to your own goals and needs.

Let's say you are using that free budget plan to save $200 per month. I recommend you place half in a bank or credit union savings account or money market fund and half in US government series "I" bonds each month. After doing this for a year or two, you will have significant money in short term form (the savings account) and long term form (the US savings bonds). By the way you can cash the savings bonds early (under 5 years). It just means you will lose the last three months of interest on the bond and we want to try to avoid that.

At some point you want to try to increase the total dollar amount you save each month. And at some point you want to change the mix of investing to half in guaranteed forms and half in riskier forms such as stocks or mutual funds. I have recommended 25% in savings account, 25% in US bonds, 25% in DRIP's and 25% in mutual funds. This mix is totally up to you and what you are comfortable with.

Don't leave life insurance out of your investing considerations. Anyone earning income for the family should be insured and this can be a source of long term earnings and is certainly necessary for security of the family. It is very wise to consider some type of permanent insurance for income producers. This would be life insurance other than that provided with your job. However, I would consider life insurance premiums as part of the household budget and not part of leftover money for investing.

Finally I want to say a little about real estate investing. There are hundreds of books, articles and courses out there dealing with real estate. There are even real estate mutual funds called REIT's (real estate investment trust). So if you have saved enough money, you can certainly consider buying real estate as an investment. However, I have three areas of advice. First only deal with a broker (not salesperson) you trust with your life. Let them give you advice and guide you. You don't need a big expensive real estate course or something you see on TV. You need personal advice from someone you know and trust as well as someone who can take you by the hand and explain everything. If they don't want to take the time to do that, walk away. And make sure they can tell you about other investments they have found for other clients. Second is to use SCAN. Especially Shop, Compare and Negotiate. Finally comes the word Equity. This is the difference between the true market value of property and what is owed against it. The more equity the better. Sure there are tax benefits to having loans on real estate, but in the long run, equity is king. Remember that when someone wants to put you in some property with "no down payment". If you have no money in the property, you problably have little if any equity and things can and will go wrong.

Having said all that, let me state that owning your primary residence is the best investment you can make. Many times it will go up in value faster than other investments. Sometimes it will not go up as fast. However, over 5 years there is no point inn history when housing values have not increased. The peace of mind owning your home gives you is more valuable than any future increase in value. And the tax benefits remain the best overall value in investing today. With rates at their current levels, I recommend you buy a home right now if you don't own one; or refinance your existing home if the mortgage rate of interest is very high. Down payments are not difficult. Especially if you are using our budget plan to save. Qualifying for a home loan is the easiest it has been in several years due to the competition for home loans by lenders. So there is no reason not to pursue a refinance or new home loan. The adjustable rate mortgage (ARM) seems to be the best way to go since it starts off fixed for 5 years and has a limit as to how much it can go up or down. Since most homeowners only keep their home an average of 7 years, the ARM is a good deal now.I have checked several banks and mortgage companies and the best deal on home loans (new or refinance) I have found is with the ING DIRECT Orange Mortgage They have great rates, no points and a very easy online application. They can tell you very quickly how much you can qualify for and guide you through the whole process. This is an extremely trustworthy and helpful group of people.

Your savings will grow if you have leftover money. That is a certainty. Just don't get greedy. I know there are investments out there that show huge returns based on past performance. But they specifically state that they cannot guarantee the future. You have worked too hard to save your money to risk it on something other than the safest of investments. So get started on our free budget plan and start building those savings. I have included a Growth of Savings calculator you can use to see how much monthly deposits into a savings account will grow over the years with varying interest rates that you can input. Good luck with your savings and investing and always remember each and every day; "Save more...Spend less...Now!"