Making investments is one factor that most young adults don’t bear in mind. As the saying goes, youth is deceitful. However, with rising job insecurity and economic uncertainty, making investments can be the best decision you ever made in your life.
Investments are beneficial from several fronts. For starters, when you begin making investments early, you stand a higher chance of escaping the daily 9 to 5 pressures. More so, you increase your chances of financial freedom as you will no longer be dependent on a low work salary.
Financial advisors recommend investing at least 15% of your income. Still, the amount of money you invest should be determined by your goals. What are your financial goals? If you don’t set clear financial goals, you are likely to lose money through daily expenses. Most adults are living from paycheck to paycheck. The idea of setting up financial goals is foreign to them, and a small percentage is stuck in the loop of endless consumerism. Living in such a way is a risk considering today’s millennial generation faces a higher level of economic uncertainty compared to the baby boomers.
Studies show that since the Great Depression, the gap between the rich and the middle class has expanded. More so, the labor market is experiencing a stagnation in wages thanks to a two-decade decline in labor mobility. By focusing on investments, young adults can achieve financial independence and save themselves from the stagnation that’s affecting labor marketing. Investments act as a financial nest for you and your family. If you start investing early, you can take advantage of potential gains, such as compound interest.
Compound interest is a type of interest that’s earned on interest. You gain it by reinvesting your earnings; for instance, you can choose to invest $2,000 annually for over ten years in your firm’s 401(k). If the average interest rate is 10% and you start investing by the age of 35 years old, then by 65 years old you will have $556,197.
Investments are not a get rich quick scheme. They take time to build and develop. You can think of it as a building wealth strategy. This strategy requires you to create a discipline in terms of your spending budget and your overall lifestyle. But if you build up this discipline, you will stay ahead of the game as your personal financial situation will improve significantly.
Types of Investments to Consider
The best way to get into an investment is to avoid debts. Debts rob you of wealth, and if left unchecked, they can lead you to financial ruin. Start paying off your debts, including credit card debt and student loans. You can reach out to these institutions and request for an extension if you feel that you are not in a position to pay them immediately. After getting your debts in order, begin looking into stocks and bonds.
The stock market is a viable place to start. When you purchase stocks, it means you own a portion of the firm that you bought into. When the company profits, you get a part of the gains in terms of dividends. Bonds are a less risky form of investment compared to stocks. With bonds, you give a company a loan, and you get interest on the loan over time. However, the interest is lower than the interest that you get in stocks.
Other types of investments that you can make include placing a percentage of your money into a savings account, or purchasing goods. Putting your money in a savings account is a low-risk investment, and the money accrues low interest over time. The founder of the popular YouTube Channel “A Sneaker Life,” MikeTheCompass, explains “Investing is important because it is your first step to taking control of your finances and it is the best way to save for retirement. Investing does not only need to be about stocks but it can also be tangible things like art, watches, clothes, sneakers, and memorabilia”. So, investing in goods such as gold can offer future financial protection.
In conclusion, investing is one of the best ways for you to shield yourself from financial risks. Investment requires you to be disciplined and to come up with financial goals. It requires you to clear your debts so that they don’t impede on your investment plan. Saving early enough comes with numerous benefits. If you start early, you will have more time and money to take risks. The first investment may not work, but the second one might because you have more knowledge and experience the second time around. Also, an early investment secures your future, and in case of any emergencies, you will not need to borrow money from others.