As we move through our mid 20’s and into our 30’s, we start to notice dramatic changes in our lives. The young, wild and carefree teens that we used to be, are gradually fading away into the distance. We are now starting the transition into the next phase of our lives, or what some people call “Adulting”.
That’s right. The seriousness of becoming an independent and self-sustained adult is here, greeting us readily with a new set of thrilling expectations.
It’s time to:
Get a “real” job. Your childhood dream of becoming a Princess, alike Meghan Markle, is probably off the cards
Take responsibility for your actions. No longer can we use the dog or our siblings as a scapegoat for our mistakes of judgment
Be Independent. No longer can we push the responsibility of booking our next doctor’s appointment onto our parents or happily waiting for our weekly pocket money to afford the groceries.
Manage your finances. We actually need to start working harder to increase our income and use that extra cash to invest wisely.
Start planning for your future. Yes, this includes retirement – eek!
Fundamentally, what life is trying to tell us is that it’s time to lift your game. For most of you, retirement is the last thing on your mind. It’s 30-40 years away. You don’t need to deal with that now, right? Wrong!
Despite what you may be thinking, developing a plan for retirement as early as possible is critical. It is the best way to get yourself ahead of the game. No matter your age, it’s never too late to start investing your money.
Here are 5 key reasons to start investing, right now.
1. You Will Develop Good Habits Early
Have you ever reached the end of a week to notice that you only have $50 left in your bank account? But wait a minute. Where did all that money go? This is a common experience for everyday hard-working Australians who live their lives paycheck to paycheck.
By becoming aware of your money early and channeling your savings (and some of your spendings) into an investment strategy, you will confidently know where your money goes and what it is doing. This is a great skill to have; enabling you to effectively manage your money over time and develop disciplined and positive spending habits.
By focusing on your budget and cutting superfluous expenses, you are less likely to:
Live paycheck to paycheck
Impulse buy or
Spend your money on silly insignificant things that
You won’t remember
You don’t need.
Alternatively, indulging ourselves and encouraging bad spending habits can cause us to develop unsustainable patterns of spending in our 30s, 40s and beyond. Not a good idea for future financial security.
This becomes a big problem as you get older, especially given life’s main gift to you is bigger bills to pay, more people to support, more debt and an array of financial obligations. This can make balancing your money very challenging.
Whilst you’re young and have less financial responsibility, you may as well make the most of it by starting now.
2. You’ll Be a Step Ahead of Everyone Else
I’m sure you’re very much aware of the saying: “The early bird catches the worm.”
In relation to investing, this expression is highly relevant and immensely valuable.
For the majority who begin investing early in life, they end up in a better financial position by retirement than those who chose to invest later in life (if at all). This is assuming that they have made intelligent investment decisions.
Another great thing about being ahead of the curve is that you will feel less stressed and more prepared to face unexpected hardships in the future. This is because you’ve already started to build your nest egg, whilst those around you haven’t… and it feels great.
Over time, this financial security or the idea of having your money working for you will allow you to afford things that your friends and colleagues can’t. A lot of it due to a lovely little friend called compound interest. If you are unsure of what this is, don’t worry, we are about to fill you in.
So, for the coffee lovers out there, maybe it’s time to start sacrificing that extra hot double shot skinny latte, and instead, invest your monetary leftovers into the accumulation of assets for your future.
3. Interest Compounds Overtime
Expanding on its brief introduction above, compound interest is another reason why you should start investing.
Savvy investors understand the importance of compound interest on their investments, and this is why they take advantage of the gains by investing early.
Are you ready for some magic? Brilliant! It’s time for your mind to be blown.
In this section, I am going to show you why compound interest is the investor’s equivalent to a magician’s white rabbit and top hat.
To help you understand how the compounding interest works overtime, here is an example below:
Featured photo credit: Why You Should Start Investing Early / Micah Fraimvia i.imgur.com
4. Time is an Investor’s Best Friend
As a young investor, time is something you have more than those already in the 40’s and 50’s. The earlier that you start to learn, the quicker you will lift your financial intelligence enabling you to be able to distinguish between good investments, great investments, and walk away from bad investments.
Another benefit of starting young is that you have more time to appreciate the rises and falls of the economic cycle. Low risk, long-term investments will have their ups and downs, but the overriding certainty is long-term growth has always proven itself time and time again.
Young adults, with years of earnings ahead of them, can afford to be a little risky in their investment choices. But it is important to note… although great risk can come with a great reward, you should only ever invest in high risk, high volatile investments with money that you can afford to lose.
As a younger investor, time is truly your best friend. So, just get started.
5. Reduced Stress at Retirement
One of the biggest stressors that Australians feel when nearing retirement is:
“Am I going to have enough to live off for the rest of my life?”
For some, the sudden realisation that they don’t have enough savings leaves them in a very difficult situation. Their new reality of needing to work into their 60’s,70’s and many in their 80’s, sets in and it can be a very traumatic experience.
For you, your current job may demand physical activity. The strength or stamina required to perform even the simplest of tasks now, may not be feasible at the age of 70. This leaves you in a bit of a pickle.
Due to feelings of desperation, people who find themselves in this situation can start to make reckless decisions with their money. They hope that heaping their money into a riskier investment could give them a quicker and higher return; securing them with a stable retirement. But, if something goes wrong, doing this strategy can lead to disaster.
Unfortunately, this is becoming a very scary truth for many Australians and is why we are such big advocates of people developing a strategic plan early to effectively manage their finances into retirement.
So, where to from here…?
After reading about the 5 key benefits of investing, some of you are probably chomping at the bit, with a wad of cash in your hands, ready to invest into just about anything.
But hold your horses, tiger! You must mentally prepare and educate yourself before plunging into the market. Investing isn’t easy regardless of age, and acting impulsively can backfire too.
For those of you who are on the other end of the spectrum – either holding your money awaiting the perfect opportunity or are waiting to save up a big sum of cash before investing anything at all, that’s not the best strategy either. It’s important to maintain a healthy balance between taking action and waiting.
Another thing to consider is that investments don’t always go up. It’s normal for the market to move up and down, much like our emotions.
Investments such as shares can suddenly plummet without notice. In a state of panic, people impulsively sell their shares at a market low, and as a result, make a loss.
Be patient and hold your assets over time. Be intelligent and expect the highs and the lows. Don’t react to loss. Understand it and plan for it.
As Warren Buffet says,
“The stock market is a device for transferring money from the impatient to the patient.”
Do you have what it takes to be an investor?
Some of you may not feel ready to take action yet, that’s fine. Others may not feel ready to sacrifice their extra hot double shot skinny latte. That’s fine too.
But for those who do feel like they have what it takes, want to start investing their money, want to change their lives for the better and want to plan for their future, here’s how we can help.
Before investing in anything, it’s important to consider the why, how, where, when and what.
Why are you investing?
How much will you need to invest?
Where should you invest your money to get the best returns?
When should you start?
What is your risk profile?
This is where we come in.
At Infinite Wealth, we can help to answer all of these questions for you, taking into account your individual situation and surrounding circumstances.
We provide everyday hard-working Australians with the education, direction and on-going support that they need to reach their financial goals, whether they be home ownership, travel and lifestyle, or early retirement.
In this one-hour session, one of our specialised Client Managers will walk you through reliable, affordable and tested strategies based on the fundamental and unchanging principles of creating wealth and only taking into consideration what you currently have available to you, right now.
We will look at how you’re currently tracking financially and what is possible for your future.