Why invest your money? A simple question, but your reasons why can vary from paying for college, financial security, starting a
family, buying a home, large future expense, changing jobs, building wealth, or retirement. Whatever your financial goals are there are two really great
reasons why you should start investing your hard-earned money as soon as possible.
Reason #1 - Why invest your money?
The cost of products and services such as housing, education, retirement, transportation and medical keeps increasing.
These increases have been continuously outpacing the average savings rate forcing people to invest for higher returns besides saving money in a bank account. Those who don't invest fall even farther behind every year that goes by.
Note: A typical savings accounts barely keep up with inflation and can result in very small returns of less than 1% after factoring in the inflation rate.
Reason #2 - Why invest your money?
Time can be your best friend or your worst enemy.
If you start investing early time is on your side. If you procrastinate, time becomes an unavoidable enemy of
compounding your money and can dramatically effect your outcome.
What you have to do if you start investing and want to retire at 65 with one million dollars?
Let's run through some examples by saying you started investing at some different timeframe's in your life 25, 35,
45 and 55. Along with the starting age the average yearly return is another important variable. The different
yearly returns that we were able to get an 8%, 10% or 12% return on your investments per year.
| Age |
Return/yr |
Beg. Capital |
Goal |
Difference |
| 25 |
8% |
$ 46,030.93 |
$ 1,000,000 |
|
| 35 |
8% |
$ 99,377.33 |
$ 1,000,000 |
825% |
| 45 |
8% |
$ 214,548.21 |
$ 1,000,000 |
1896% |
| 55 |
8% |
$ 463,193.49 |
$ 1,000,000 |
4210% |
| |
| 25 |
10% |
$ 22,094.93 |
$ 1,000,000 |
|
| 35 |
10% |
$ 57,308.55 |
$ 1,000,000 |
433% |
| 45 |
10% |
$ 148,643.63 |
$ 1,000,000 |
1283% |
| 55 |
10% |
$ 385,543.29 |
$ 1,000,000 |
3488% |
| |
| 25 |
12% |
$ 10,746.80 |
$ 1,000,000 |
|
| 35 |
12% |
$ 33,377.92 |
$ 1,000,000 |
211% |
| 45 |
12% |
$ 103,666.77 |
$ 1,000,000 |
865% |
| 55 |
12% |
$ 321,973.24 |
$ 1,000,000 |
2896% |
As you can see time is your best friend the earlier you start. Even if you haven't started as early as you would
like simply starting is the most important factor!
The average yearly return is also an extremely important factor in getting to your financial goals faster. As you
see from the table above that you would need over 3 times as much starting capital if you get an 8% average yearly
return vs. a 12% return. That's a difference of $35,284.14! This emphasizes the important of finding the right
investment strategy for you that yields the highest return, while staying within your risk level.
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