For easy reference, all credit score and credit report information is now available in one place:

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High-interest debt is a truly hideous thing.  If "compound interest is the most powerful force in the world," as Einstein is rumored (1) to have said, then the last thing you want is for compound interest to be working against you.  If you carry a balance on a credit card instead of paying it in full, things can get pretty bad.

How bad?  This bad:

All investors must keep in mind that historical returns do not guarantee future returns.  However, the past is often a useful place to look to get some sense of what to expect in the future.  This article shows quantitatively that long-term, annualized, inflation-adjusted returns on the US stock market during periods from 1950 to the present have been approximately as follows:

40 years - - - - - - - (5.0 to 7.5%)
35 years - - - - - - - (5.0 to 7.0%)

Play with the original graph here

The Excuse: Fund Minimums

"Fund minimums are too high - I can't afford that."  This is a very common excuse I hear when I ask my peers why, instruction manual in hand, they haven't started investing yet.

It's true: many mutual funds require minimal initial investments of thousands of dollars.  Most Vanguard index mutual funds require $3,000 to get started, and the lowest-minimum Vanguard Target Retirement funds still require $1,000.  After the initial investment, additional automatic investments can be as small as $50.  For this reason, I typically recommend budgeting to save that $1000 minimum over several months, making the initial investment, then setting up automatic monthly investments at whatever level you can afford.

If you'd like to get started immediately and you're willing to do a little extra manual work, there is another option that maintains the advantages of an index mutual fund -  low expense ratios and broad diversification - while allowing you to invest in $50-100 increments.

Out of disgust for companies that wield their considerable power irresponsibly, some environmentally- and socially-conscious investors avoid the stock market entirely.  As I explain in a previous article, this strategy is a poor one as you really can't afford to avoid market risk entirely.

Investing for the ethically-inclined (X1)

What's an ethically-concerned investor to do?  You could certainly perform your own due diligence on each company you would like to invest in and then purchase individual stocks, but this is hardly feasible for someone working a full-time job.  The process is extremely work-intensive, may incur significant transaction fees, will suffer increased volatility, and is very likely to fail to beat the market's overall returns.  Fortunately, there is another option: social index mutual funds.

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In school? You have options! (X1)

It is a shame that graduate students - a group who could very much use the opportunity to avoid falling behind their better-paid peers in saving and investing - are very often ineligible to contribute to a Roth IRA.

However, all is not lost!  Some graduate students are made eligible by other sources of income, and all graduate students can engineer around the problem with another qualified savings and investment option: the 529 Plan.