18 Dec Why Invest? It’s the Gift That Keeps On Giving
Take a stroll through any mall this time of year and, in addition to all the holiday frenzy, you’ll be bombarded with messages to “treat yourself,” because “you know you deserve it.” While I’m all for the occasional splurge (as part of your 30% wants money, of course!) you have the power to give yourself so much more than things. You have the power to give yourself financial freedom. When you invest, your money can grow and essentially work for you over time.
Why invest? Let’s look at the numbers. What if you took the same cash that you would have spent on a new purse, the latest tech, or what have you, and put it toward your investment account?
Let’s say your splurge of choice costs $500. Once you spend that money on an item, it’s gone. A Prada wallet won’t pay you back. More than that, fashions fade. Tech becomes obsolete. Items can break, become worn, and get lost. An investment account, on the other hand, is the gift that keeps on giving – to your future. If you invest $500 in the stock market and let it grow, assuming for the sake of round numbers a ten percent annual return (that means that your money grows at a rate of about ten percent every year), here’s what could happen:
|Start with…||After 5 years||After 10 years||After 20 years||After 30 years||After 40 years|
This is the power of investing over time. Now imagine how much more of that power you can harness if you invest $500 every year. What if you invest more than $500? What if you invest the maximum amount you can put in a Roth IRA each year, which is currently $5,500? (See for yourself with this calculator.)
This power is even greater when you start investing sooner rather than later. Millennials, I’m looking at you. Don’t sell yourself short if none of your friends are thinking about this. But whether you’re 25 or 55, by taking control of your finances you have the power to change your reality.
Once you are free of high-interest debt (like credit card debt) and you’ve started your emergency fund, it’s time to start investing. If you don’t yet have an investment account, consider opening a Roth IRA. With a Roth, you contribute after-tax dollars now and the withdrawals you take in retirement are tax-free. Invest in a diversified portfolio – global stocks, bonds, and hard assets – and aim to fully fund your Roth IRA every year that you can.
Build a bright financial future. Give yourself the gift of financial freedom.