Thursday, August 30, 2007

Dare to Invest for Your Future

Investing is a word that most people equate with taking risk by investing into the stock market. Real estate is another venue of investing. Some people invest in rare metal such as gold. In my opinion, one of the most important investments you can make is in yourself. It involves self improvement via education and setting optimistic financial goals. There are many venues of investing and I will cover a few in this short article.

I believe the main purpose of investing is giving you peace of mind knowing that your future is secure. This sense of well being is euphoric and it is well worth the effort to pursue. Financial security is something that is within the reach of everyone despite income levels. Money does not always bring happiness, but it does allow you the freedom to pursue your dreams. Money is just another tool you can use to gain what you want and deserve.

Investing in yourself is something no one else can do for you and only if you’re willing to make the effort within. You have to find your niche in life and pursue it with a passion. It can be through a formal education, working with a mentor, it can be a hobby or any combination. When you find something you love, it’s not all that important that you’re the best at it. What is important is that it makes you happy inside and that is the key to lifting your inner spirit to a new high. When you’re happy, it radiates around you and to others around you and that is important. You attract people when you’re happy within.

Investing in your financial future is very important also. It allows you the freedom to explore new dreams later in life or branching out into another line of work at your leisure. Financial investing is something that everyone can and should do throughout their life. In my early adulthood, I thought financial investing was only for the very rich, but that is not true at all. All it takes is a little discipline and setting goals.

It’s so easy to put down on paper what you should invest for your future. It’s quite another to actually set up a payment allotment plan and begin. I had to make a decision in 1985 on how to invest into a new retirement savings plan at work. I was 28 years old at the time and was in the process of buying my first house, so I really didn’t think I could spare any money for investing. I was fortunate to have a friend who understood investing and he asked me a couple very basic questions. What is the maximum I can contribute per year and what is the minimum amount. He also wanted to know roughly how many years I had to retirement. He prepared a spreadsheet showing how invested money can grow over time. At the time, I was only making 22K per year, when I saw a figure approaching 500K my eyes lit up and I decided this was something I had to do.

The “Magic of Compound Interest” was a term my friend brought up and is something that meant very little to me in 1985, but it’s a term you should understand. It is something a great mathematician named Albert Einstein knew quite well. Albert Einstein said that compound interest is “the greatest mathematical discovery of all time”. Albert understood how earning interest and time allowed you to build wealth. The reinvestment of your interest earnings and time spent in a savings plan are very critical. I did not grasp compound interest until my friend put figures on paper that clearly demonstrated the magic of compound interest.

It’s hard for people to grasp how compound interest works, but basically the interest you earn is not paid out to you, it’s reinvested. So, you’re account grows not only by what you put into it, but also on the interest earned in the past. It’s almost like rolling a snowball down a snow covered hill. By the time it reaches the bottom, it’s huge and it’s large enough to become your new foundation.

The United States government encourages people to save for their retirement by making their contributions tax deferred. This is another huge advantage to setting up a retirement savings account for you. Many tax payers fall into the 15 percent tax bracket, so if you save 2000.00 per year, that is a savings of 300.00 right off the top. Your tax free deposit is not seen as taxable income. I would much prefer to save 300.00 per year by not sending it to the IRS. You win not only by building a nest egg for yourself, but your saving money that would normally go to the IRS.

One of the biggest reasons people do not invest money into a retirement plan is because they think they can’t afford to do it. That is a very legitimate reason, but you need to understand how little it takes to make a difference in your life. I use to smoke cigarettes when I joined the Navy in 1975. Back then, it seemed as if just about everyone did. Fortunately, for my health I managed to quit many years ago. Just one carton of cigarettes in California today can cost almost $40.00. Just by quitting the smoking habit, I saved myself roughly 40.00 per week. As an example, let’s say an 18 year old smoker quit today and put just 40.00 per week into a savings plan that averages 8 percent interest. At age 65, that ex smoker would not only be a lot healthier, he would be sitting on a nest egg worth over 1 million dollars. Actually, it would be exactly $1,017,394.90.

Some people will say that this is a silly example because when you’re young you spend every dime you make. If you think like that, you will spend everything you make. Your inner thoughts are more important than you will ever realize. By focusing on what you want and staying positive, it will come to you. Just dare to imagine what your retirement would be like at age 65 if you had over a million dollars!

I’m not a grandparent yet, but that day is just around the corner I’m sure. I think a great gift to a grandchild is something you can give them long after your gone. The gift is teaching them the gift of giving and also investing. If you were to put away $4000.00 and put it in an account that earns 9 % interest, it would be worth one million when that child turns 65. So you can pass this life lesson on to someone who will keep your picture on the wall for years after your gone. But more importantly, that person will pass on what they learn from you to their grandchildren.

In conclusion, I just want everyone to realize that if you want a comfortable retirement, it is in your hands. If you visualize your financial goals and set forward a plan, it will happen. All it takes is having a clear plan in your mind and staying focused on your dreams. I hope this article will help you and your family realize that investing is for everyone. If you wish, you can contact me or post a comment and I will get back to you if you have any questions. Have a great day, stay positive and take charge of your future.

Richard Sizemore resides in Los Angeles California and enjoys writing articles for this website. My wife, Cynthia also writes articles on her website, Her Self Improvement articles are outstanding and I highly recommend them.