7. Move long-term savings into the stock market.

Let's say you haven't a clue about the stock market. You don't know what it all means, and what's worse, you're not the slightest bit interested in learning. Hooey! You're involved in the stock market every day. When you buy jeans from the Gap, a Diet Coke to wash down some pizza, sneakers from Nike, and chips and salsa for your Super Bowl party -- you're supporting public companies in which you can invest. Investing in stocks can simply be a matter of examining the companies around you that you're buying a lot of stuff from each day.

Many advisors suggest broadly diversifying your long-term savings into stocks as well as bonds, gold, real estate, blah blah blah. We don't buy it. Consider these numbers, taken from the book Stocks for the Long Run by Jeremy Siegel -- a business professor at the Wharton School at the University of Pennsylvania. Professor Siegel studied how stocks and other investment options (such as bonds and gold) performed over almost 200 years, and he found that stocks fared considerably better. To prove his point, he looked at what happened to a single dollar invested in 1802 (only three years after George Washington died) in stocks, short-term bonds, long-term bonds, and gold. The results are impressive. In 190 years, the single dollar grew to the following sizes:

Stocks:            $3.1 million
Long-term bonds:         $6,620
Short-term bonds:        $2,934
Gold:                    $13.40

Of course, you probably don't expect to live 190 years, right? So, how do stocks do on average, each year? According to the Ibbotson & Associates 1997 Yearbook, stocks outperformed everything else you could have invested in during 52 out of 52 twenty-year periods since 1926. Check out these average returns from 1926 to 1996:

Large company stocks         10.7% per year
Small company stocks         12.6% per year
Long-term corporate bonds     5.6% per year
U.S. treasury bills           3.7% per year

Remember that this period included the crash of 1929, the Great Depression, and several major recessions. Yet, despite occasional periods of unpleasantness, despite the occasional wailing and gnashing of teeth by un-Foolish investors, stocks were still your best bet and still rose in value -- over the long term.

Here's the bottom line. Credit cards offer you revolving debt, while they dock you as much as 18% per year (or more!). But the stock market has risen at an average annual rate of 11% for most of this century. In which direction do you want to be headed -- 11% more moolah per year, or 18% less moolah each year? The end result of this decision is dramatic.

That's why we like stocks for all money you can afford to put away for more than five years.

Step 8: $1 a day...