Undian besar Togel Singapore 2020 – 2021. Prediksi spesial yang lain hadir diperhatikan secara terprogram via poster yg kita umumkan pada situs itu, serta juga siap dichat kepada teknisi LiveChat support kami yang siaga 24 jam On-line untuk melayani semua maksud para bettor. Yuk buruan join, & kenakan promo Togel serta Kasino Online tergede yg nyata di tempat kami.
You’re likely familiar with the saying,
A penny saved is a penny earned.
It sounds like the type of vague financial advice you might hear from your relatives around the holiday table.
But how is that penny earning anything?
If it’s stuck in a traditional savings account, likely not much since the current national average return on a savings account is 0.06%. Even my favorite high yield savings account, Ally Bank, is only paying .50% on their savings account right now.
So, what if that penny was invested instead?
Saving and investing often get conflated, but they are two different things and serve different purposes.
What’s the difference between saving and investing, and why is investing so darn important?
Saving Protects, Investing Builds
Both saving and investing play critical roles in your financial wellness, but those roles aren’t the same.
When you save money, you store it in a safe, accessible place so you can have it when you need it. The money won’t grow much, but that’s okay; it’s there to protect you.
An excellent example of saving money is building up your emergency fund. You store the money in a safe and liquid account like a high-yield savings or money market account. That way, you can easily draw from the account when you need it and not go through the extra steps of selling off investments first, or worse, going into debt.
An emergency fund is a fundamental component of your financial plan. It offers a cushion when life doesn’t go your way—lapse in income, unexpected hospital bills, costly home/car maintenance, bereavement travel, etc.
Saving is also valuable when you have short-term financial goals (aka you need the money in less than five years). So if you’re saving for a downpayment on your first house, getting ready to buy a new car, or planning for routine expenses like taxes or insurance premiums, saving that money is likely more beneficial than investing it.
We’ve talked a lot about what saving is, so what’s investing?
Saving offers financial protection (which is why you want your savings to be FDIC insured), investing offers the opportunity for financial growth.
Here’s investing in a nutshell: you purchase securities (stocks, bonds, ETFs, index funds, etc.) with the hope that they increase in value and give you more than you put in over the long-term (think 10-20+ years). One of the first places you start investing is in your retirement accounts.
When you invest, you take on more risk. There’s no guarantee how your investments will perform, but there’s nice historical data to back up a long-term approach.
Where average annual savings account yields don’t break 1%, investing gains can be ten times as high in the long run. For example, the average yearly return for the S&P 500 since its inception in 1926 is 10-11%.
As you can see, there are immense opportunities to build wealth when you invest, like retiring on your terms.
But investing isn’t just about your super long-term goals like retirement; routine investing in a brokerage account can open you up to several financial opportunities along the way. This is important for your mid-range goals that might be 5-10 years in the future, like buying a house, starting a family, etc.
Let’s take a closer look at why investing can help you maximize your money and live a life you love.
Investing Gives You Permission To Say “Yes”
Before you move on to regular investing, ask yourself,
- Do you have (or are on your way to) a healthy emergency fund? We usually recommend around three to six months of net pay in a high yield savings account. Does that number overwhelm you? Start with one month’s worth of your net pay and build from there.
- Have you eliminated any high-interest rate debt? This is generally credit card debt and personal loans.
- Are you sticking with your debt-repayment plan for your other debt like student loans and car loans? We want to see you be debt-free! Be sure you consistently pay the minimums on your low-interest rate debt. It might even be a good time to refinance student loans, a mortgage, or a car loan.
- Are you investing for retirement? Before you invest for other things, you want to set yourself up for retirement. If you have a company match, start by contributing at least enough to qualify for that—it’s free money, after all.
- Are you maxing out your retirement accounts? If not, it’s time to increase your retirement plan contributions by 1% now and consider maxing out an IRA or Roth IRA with $6,000. Keep in mind that the 401(k) max is increasing next year by $1,000 to $20,500 per person per year.
If you can confidently answer “yes” to each of these questions, keep reading!
Here’s a caveat* ff you’re not maxing out your retirement accounts but still want to invest in a brokerage account, you can, but it’s important to save a little more each year for retirement.
Once you’ve got the basics down, what comes next?
You can get more creative and explore different ways to grow your wealth. Perhaps you’ll open up a brokerage account, max out your IRAs, open a 529 Plan for your child’s education, etc.
Your opportunities are limitless; it all depends on your goals.
But what if you aren’t sure what you’re investing for?
For example, when you start investing in a brokerage account, you may not have a specific goal in mind—that’s okay. Just having that money available allows you to say “yes” when a fantastic opportunity presents itself.
Think about investing like creating your “yes” fund, and you could use it for anything—a wedding, honeymoon, dream vacation, caring for a parent, a career change, a move, etc. Investing can give you choices, options, and the freedom to make those choices based on what’s best for you—how cool is that?
Another bonus is that investing helps your wealth keep pace with inflation, so your hard-earned money retains its value through the years. Inflation is usually at about 2-4%, though this year it’s reached historical levels (about 6% as of October 2021). Regular investing can help your money grow and avoid losing value over time.
Yes, Investing Is Liquid
A lot of people think that investing in the stock market means that their money isn’t accessible, but that’s not true. Investing is liquid; you’re not barred from selling your investments when you need to—just be mindful of your tax liability.
Ideally, you should plan on holding taxable investments for at least a year, so you’ll be taxed at a long-term capital gains rate on the investment growth (rather than your current tax bracket like you would be on any short-term investments).
Sure, it may not be as accessible as the $20 you found hidden in your winter coat pocket. Still, it isn’t as inaccessible as other investments like your home, where you’d either need to sell it or open up a line of credit to access any equity.
Since you can access the money in your brokerage account, think about it like investing in “touch” money. So many long-term investments you can’t really touch until you retire, like your 401(k) and traditional IRA. But that’s not the case with a brokerage account; you can use the funds when you need or want to.
Investing Sets You Up For Future Opportunities (Even If You Don’t Know What They Are Yet)
If there’s one thing we know for sure, it’s that life changes happen quickly, and investing gives you an avenue to financially prepare for those changes ahead.
A brokerage account is a super flexible way to give you options in the future. Do you want to take a year’s sabbatical from work? Is extended maternity leave an important goal? Do you see yourself opening your own business? Investing can help give you the financial freedom to make those decisions and keep you on track for your long-term goals.
Let’s highlight this example with some numbers.
Say you open a brokerage account and make an initial investment of $1,000. You also plan to contribute $500 a month. Using a compound interest calculator, in five years with an average 6% return, your original $1,000 is expected to grow to over $36,400!
Think about all the wonderful things you could do with that money—have your dream wedding, put a down payment on a house, or anything else that would enhance your life.
Your priorities will likely shift as you move throughout your life and career. Perhaps you’ll realize that you want to start a family, change jobs, move abroad, etc. When you invest, you put yourself in a better position to accomplish your goals—and reaching your goals is what your money is all about.
You might also enjoy reading: