Do We Need To Invest?
In today's society, the financial burden has been or is in the continual stages of being shifted to the individual and their families and for those that are poor to middle class these are the rungs of society that will be impacted the most by these shifting economic realities as we try to make ends meet. I believe some, not all, of this impact we experience may be our own fault, largely, because of our lack of conviction to become vested in our own financial literacy. Mostly, the sole purpose for you getting up and going to work each day is purely of economic necessity to earn money to pay for the things we need in life. Some of us are stuck on just that thought of exchange trading our time and skill for money. The thought of financial investment for ourselves often takes a tertiary position in our mind when compared to things like what we are going to buy or where we going to go when we get paid. I will give 7 reasons below why I think that investing should be at the forefront of your mind.
Investing Definition
It is good to have a definition of what it means to invest and a Google search returns it is to, "expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture" or "devote (one's time, effort, or energy) to a particular undertaking with the expectation of a worthwhile result." Now, we have added a definition of what it means to invest, now I provide some context in the form of reasons of why we need to invest. The order of reasons are not necessarily of any significance as all are important and/or intertwined.
Reason #1
The only way that I know of for those dollars you make to become, potentially, more dollars, is if you invest those dollars in something that will turn a profit. If all you ever do is spend every dollar you make, you will remain in a perpetual cycle where you never ever get ahead. If you tack on the fact that all dollars are already spent due to debt, you are one paycheck away from financial ruin. Also don't misconstrue saving as investing though some degree of saving is good, it is not the same as investing. Savings alone doesn't lead to capital appreciation, especially if left in the bank today where interest rates are minuscule, as it doesn't even keep up with inflation. You have to think in terms of setting aside money for the sole purpose of making one stack of hundreds become two stacks through compounding and so on like I mentioned in my post, How To Be Wealthy By Automating Finances. Investing takes sacrificing some of today's pleasures, but not necessarily to buy tomorrow's pleasures, but instead just to keep the lifestyle to which we have grown accustomed.
Reason #2
The government, your company, even your own family, will not or be reluctant to, take care of you, especially if it is causing undue economic strain to them. If you do not yet see the writing on the wall, the entitlements, the pensions, the safety net programs are under attack by the powers that be. Just listen to the news around the possibility of insolvency of Social Security and pensions, the broken and the reneged upon promises, even after you did your part only to have the terms and conditions change when your time comes due. Programs that used to get funding to help those in need in our communities are being defunded or outright shut down. Also, families are under extreme pressure as well to make ends meet and to meet with circumstance where taking care of loved ones with no resources to bring to bear is also an extremely taxing situation where economic choices get made maybe to the contrary of others liking. So, if you really think you can count solely on these programs like a Social Security, or a pension, or safety net to take care of you, or family members to just take care of you, than God bless you.
Reason #3
If you every want a chance to have economic freedom, i.e. retirement from the rat race, then you have to invest today's dollars. The sooner you start to do that the better your chances for achieving that. In reason #1, I explained what happens if you don't invest anything. I personally have lost 15 years or more of investing opportunity, and as a result I am paying for that today because I have to invest even more to have a realistic chance at a retirement. If you are spending every dollar, you will never have economic freedom and you may be content with that until you read further reasons below. I think even the best of us will grow wary of the 9 to 5 after 30 years and yearn to just relax or do something different on our own terms and schedule. If you haven't invested wisely and consistently over time, I am pretty sure you will not have that as a choice.
Reason #4
Wage growth has remained pretty stagnant for the past 35 years or more for many Americans, unless you are the CEO or an executive in a Fortune 500 company, but guess what hasn't remained that way - the cost of goods and services. The dollars we earn today are losing more and more of their purchasing power thanks to the Federal Reserve and others in the powers that be. Our wages are not growing as fast as inflation. So, imagine what happens when our j-o-b (just over broke) isn't paying us any more than we made 10 years ago and our only source of income is our j-o-b, but the cost of goods and services continue to go up, and we have invested little or no money to attempt to expand our money supply, or increase our cash flow because we don't understanding that investing stuff, or we got to much stuff we want to consume today that our money is tied up in. I think it is easy to see that if you haven't already, you will begin to have to make tough economic choices about what is really essential for your lifestyle and other things, like depreciating assets, may need to be pushed aside. I just hope the things that are pushed to the side aren't life insurance, long term care, and continual commitment to financial investment. As these are tools to sustain yourself and your family.
Reason #5
The labor you provide be it physical/mental may be more short lived then you anticipated and yet economic realities remain. You may plan today to work for the next 35 to 40 years - good for you and that level of commitment is applaudable, but what if you are struck with disability well before that time has passed that prevented you from working to earn a living. What would hold you over? Maybe savings for awhile, but this could run out. Then what? This is why it is important to invest in assets that provide continual cash flow. However, their are also investment that can be done in protection products, and having financial literacy will expose you to know to invest in things like disability insurance, especially if you job is more physically oriented, life insurance, and long term care. When unfortunate events like this occur, these type of financial products will sustain you and your family from some forms of financial catastrophe.
Reason #6
Your skills and abilities may become obsolete. The way technology is advancing, pretty soon robots will have all the jobs 😆, then hopefully all the points I made up to now on reasons you need to invest will be mute as you won't have to do a thing yet production will go on. However, until that time, if you have not invested in upgrading your skills or creating another source of income should one source be cut off, you could be in trouble. In today's society, I think it is important to be multi-faceted and able to do a lot of things which make you an asset. So always try to be open to avenues where you can develop new skill sets. This can help keep food on the table!
Reason #7
It gives you pleasure to invest. You just get it and don't necessarily need the doom and gloom of some of the above reasons to see why it is necessary and useful to invest. You do it because you love it. What more to it is there?
In closing
Times are changing rapidly for the working American and more financial responsibility for your own well being is on your shoulders. I hope I have given some persuasive reasons why you should invest. Throughout this blog post, I didn't mentioned besides, life and disability insurance, and long term care, what exactly you should be investing in; however, the definition above mentions profit, so if what you decide to invest in doesn't produce a profit and mitigate concerns around those first 6 reasons above, then you need to find something different to invest in that can. I have some thoughts on things that can in the links below which I hope you read, but when it comes to investing do what is comfortable for you, but do it soon and often. I realize that investing has a cost and I have listed 7 reasons why I believe we need to invest and those reasons are why the cost is worth paying, at least for me, but know there is also a cost if you don't and you may not like the latter. In the picture above, the answer should always, always be yes to the need to invest.
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Why You Need Life Insurance
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