Investing Basics - The Key to Building Wealth
To invest means to expend money in expectation to earn more. Investing is a key to building wealth over time in your life. If your new to the YOL blog – welcome! We talk about ways to achieve your true potential of health, wealth, and freedom. Inflation (the rise of costs) is about 2% per year. This means every year the money you earn is worth approximately 2% less! This is one reason why you must be looking into ways to invest.
For the ultimate book on building wealth and more info on investing please read our newest book Optimal Wealth. Learn basics on saving, investing, budgeting, goal setting, habits, how to save money, and much more.
Investments range across many different fields. When you invest your money, you are looking to gain profit (more money) from it. This is where you can put your money to work so to speak. Instead of only receiving your hourly wage from your job you can put money to work for you while you sleep. This can make the difference to becoming a millionaire or not for many people in their lives. For example, when someone invests in real estate, buying their home and living in it for 20 or more years, they can make massive profits.
Types of Investments
There are many different types of investments out there. For today we will cover the basics of what you need to know to get started. When you want to put your money to work you have many different options. Some types of investments include real estate - whether purchasing a home/apartment to live in or an investment property to rent out, the stock market – this could be anything from buying stocks, bonds, mutual funds, and ETFs, as well as saving cash.
Owning different types of investments like stocks, bonds, real estate, and ETFs will help keep you diversified. This means to spread out your investments across different areas to limit losses and maximize profits.
The main takeaway here is you want to start investing early and you want to make it a habit every single month. When you commit to doing this early on, you will take advantage of the power of compounding and time. The longer you invest the greater your returns can amount to.
How Much to Start?
Even if you are not earning loads and loads of cash yet it’s never to early to start investing. The stock market can be a great place to start even with your first $1000 of savings. That’s the beauty of the market, is you can invest any amount of money you want, whereas something like real estate can take longer to get into as you will likely need to have a bigger down payment before you can buy in.
I wouldn’t say there is an exact amount when you can start, although now is the time to start wherever you are in your financial life. Even by deciding to save $50 a month will add up to a nice $600 in one short year. If you’re looking for great stories and real-life experience on money, be sure to check out our book Optimal Wealth! Now available in paperback, eBook, and Audiobook formats on Amazon, iTunes, and Audible.
If you’re a Canadian reading this you’re in luck, because the two accounts we recommend opening are a TFSA-Tax Free Savings Account and an RRSP-Registered Retirement Savings Plan. Both accounts are tax free on any earnings gained in them which is a huge plus for you! The RRSP account is also tax deducible from your annual income. Meaning if you deposit $5000 in one year into your RRSP account, $5000 will be pulled off your income for tax time – lowering the total taxes you will owe. If you want further info on these accounts, please read our book!
As you can see investing is for everyone, every age, and financial situation. It’s never too early to start and even if you have a spare $100 laying around start your savings account now! The road to financial success starts with one decision, to commit to saving your money. Financial smarts can be learned by anyone and is straight forward. Thanks for checking out today’s post, see you next week.
Chris M Wilson