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3 Ways You Can Invest in Yourself

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In 2008 at the Berkshire Hathaway annual meeting, CEO Warren Buffett had one major message to pass along to his shareholders: invest in yourself! As Buffett put it:

The most important investment you can make is in yourself. Very few people get anything like their potential horsepower translated into the actual horsepower of their output in life. Potential exceeds realization for most people … The best asset is your own self.

For a lot of us, finding avenues to pay ourselves isn’t always the easiest thing to do. So following in Buffett’s footsteps, I’ve surmised three practical ways you can invest in yourself now to make your financial future that much brighter.

1. Seek out dividends
Dividend paying stocks give you a two-fold benefit: They pay quarterly or yearly distributions that go straight into your pocket and they have historically outperformed non-dividend paying stocks over the long run.

Dividend paying companies often have a stable financial background and can weather financial maelstroms better than most other companies. As fellow Fool Anand Chokkavelu painstakingly found out, Coca-Cola (NYSE: KO  ) , McDonald's (NYSE: MCD  ) , and Procter & Gamble (NYSE: PG  ) are three great examples of financially rock-solid companies with stellar dividend track records that could add some serious dollars to your bottom line.

2. Stop paying taxes
No, I’m not implying that you subvert the government to bypass paying your taxes. I mean maximizing your income by investing as much as you can in a traditional IRA or Roth IRA now. Roth IRAs have very few stipulations with regards to who can invest and to what extent. The key point is all the money that goes into a Roth IRA and grows in a Roth IRA is completely 100% tax-free!

For those who qualify based on income, age and marital status, a maximum of $5,000 can be added annually for those under the age of 50, and $6,000 annually for those 50 or older. Compounded over time, a Roth IRA has the potential to give you the retirement you’ve always dreamed of.

3. Or … minimize your taxes
You can also minimize the amount of taxes you pay to the government right now by adding to your 401(k). Not only are you investing in your future, but you’re reducing your tax liability in the present by reducing your taxable income.

On top of this, many highly reputable companies try to boost their productivity by offering valuable worker benefits. Some, for instance, will match your 401(k) contribution up to a certain percentage. Employees of IBM and Weyerhaeuser both benefit from programs which match contributions into a 401(k) dollar-for-dollar up to 6% and 3%, respectively. If your employer offers a 401(k) and matches up to a certain percentage, take advantage of it -- it’s practically free money!

What are strategies you’ve employed to invest in yourself? Share your stories in the comments section below and consider giving yourself a financial edge by reading up on our 13 Steps to Investing Foolishly.

Berkshire Hathaway and Coca-Cola are Motley Fool Inside Value choices. Berkshire Hathaway is a Motley Fool Stock Advisor recommendation. McDonald's, Procter & Gamble, and Coca-Cola are Motley Fool Income Investor selections. The Fool owns shares of Berkshire Hathaway and Coca-Cola.

Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. He would like to remind you not to forget about our friends in Japan who could still use a helping hand. You can follow him on CAPS under the screen name TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that’s always on your side.

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