An Excellent Method to Prevent Long Term Debt - Dollar Cost Averaging

Most people would agree that a long term savings plan is a critical component of an individual. s financial health. Without adequate savings you run the risk of accumulating debt during your retirement years. In some cases, inappropriate levels of savings my even prevent a person from retiring at the desired time. Although people can see the need for having a retirement plan in place, many people become overwhelmed when attempting to work out the details. With literally hundreds of choices available it is often difficult to select the option which best suits your needs. However, many experts would suggest that you consider the time proven savings method called dollar cost averaging.

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Dollar cost averaging is a savings method which calls for an individual to make consistent investments at fixed amounts. A consistent investment is a set amount of money placed in the same stock(s) (or funds) at regular intervals. By following this method an individual can smooth out the effects of market volatility. More shares are purchased when the price is lower and fewer shares are purchased when the price is higher. On average, this enables an investor to obtain a lower price per share than would be gained through attempting to time the market. (1) It also provides an average price per share which is lower than the average market price per share for that time period. One great feature of this plan is that it does not take large amounts to initiate. Consistent long term savings is the key. This money continues to accumulate over time creating an effective protection against the accrual of debt and the threat of a deferred retirement.

There are many excellent long term investment programs from which to choose. Dollar cost averaging is one such method that deserves hard consideration. This savings plan encourages people to invest consistently over a long period of time. This not only provides the individual with a lower than average price per share but it also allows them to benefit from the advantages of compound interest. As with any long term plan the key is too begin early. The sooner you start the larger your level of debt protection will be in the future.

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.