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Last week, a good friend from work asked me if I had started investing yet. I don’t know why, but it felt like someone was asking me if I knew Jesus Christ as my Lord and Savior. It came across as that serious of a question, and then I realized that it was because it IS a really important question and a huge part of your financial well-being on this Earth. I am in no way equating salvation to investing. It sounds that way though, doesn’t it? It’s just that the tone and nature of the question was something that stopped me in my tracks, as a question of salvation might impact someone.
Investing for retirement is one of those things we can spend our entire lives running from because of fear and lack of knowledge. If we were smart, we would turn and embrace the unknown and make a point to learn about it.
In the personal finance world, you’ll hear time and time again that investing for retirement is one of the few “real” ways to build wealth for your future. Sure, you can scrimp and save every penny you have, but without the power of compound interest, it shows little return.
That is why I took my friend’s inquiry seriously and started reading up. I mentioned not long ago that I had been listening to Suze Orman’s podcasts to learn more about personal finance, and even wrote a post of five things I learned, so investing was on my mind. I just didn’t feel I had the money to start right now. I felt the need to wait until we paid down our credit debt, etc., and in fact, that is what most PF experts tell you to do. They tell you to be debt free and have an emergency fund built-up.
The Problem with Waiting…
The problem with waiting is that it could take several years to become debt-free, and then you’ll have missed out on the power of your 20’s and compound interest. The power of compound interest is greatly weakened if you wait to begin investing in your 30’s and especially 40’s. Plus, some of your debt may not have a higher interest rate than the average return of the market.
Historical data says that on average, the stock market returns about 8% over the course of 40-50 years. However, in this day in age, a lot of experts are saying you’re lucky to return 5%. Then again, you never know. The point is, you can at least keep pace with the market and make a little money than if you started investing a little later on.
If I have debt with interest rates lower than 5%, I think I should definitely take some of my money that I am already putting to the side and start to invest it. Maybe the experts are right and wrong. Maybe the market will return less than years past, and no one can ever really predict it, but if the thought of investing actually gets me excited about saving money, what’s the problem?
Anyways, this post has taken quite the turn, and I will never claim to be an expert about stocks and the market or investing. I just wanted to say how proud I am of myself for doing something no one in my family has ever done – opening a retirement account. That in itself is a huge step and accomplishment for someone who was raised with very little knowledge of investing, retirement, and money.
So yay for me! If anyone has any tips for me on investing, PLEASE SHARE!
UPDATE: Why I’m switching from E*Trade to Charles Schwab.. DO READ!
Investing Tips for Inspiration, Motivation, & Knowledge
Here are some helpful articles I have been reading to learn more about investing and to feel more inspired to save and invest more (all while striving to get out of debt).