Why You Should Start Investing as Soon as You Get a Job

Personal Finance



If you are at the prime of your career, you probably do not worry about the future that lies ahead of you. You have this “devil may care” attitude towards handling your finances, not caring about setting anything aside for the rainy days. Such is where the landscape should change. Now is actually the best time for you to prepare for your retirement and what might come in the years ahead. Think that you are too young to think about retiring and saving for the future? Here are several convincing reasons why you should start investing as the soonest possible time.

Now is the Peak of Your Career (and Your Health as Well)

If you are in your 20s to your 30s, then you are at the peak of your health and vitality. This is the perfect time when you can take advantage of lucrative career offers and work yourself off with very minimal threat of health problems. Make the most out of the money you make while you are still young, advises financial planner Pieter Willem Moolman. And when you do get to earn heaps for working yourself off, make it a point to set aside for a retirement account.

While You Still Do Not Have a Family to Feed

Although it is recommended that you invest more money when you get older, it will be hard to do specially if are married and with kids. Of course, you need to keep their mouths full, their bodies clothed, and their heads sheltered. So while you are still young, single and just fending for yourself, fill up your 401(k) and take a chance with stocks, according to CNN Money. Apart from keeping yourself pampered when you retire, these investments can actually help you a lot when you need big money in the future (like sending your child to college or buying your dream home).

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So that Money Can Work for You, and Not the Other Way Around


A great thing about investing early on in your life is that your money can do the working for you, instead of the other way around. As early as today, you can devote some hard-earned money to your retirement account – a 401(k) or a 403(b.) You can actually get tax breaks from the IRA with the money you save in your 401(k.) Your cash can grow without tax deductions until you claim it once you retire.

Another area to invest in are stocks or stakes in a company. These have been proven to be the best with regard to long-term claims, as stocks grow at an average of 9.8% every year. With such options, it will be your money that will be working hard, not you.

Imagine the following scenario: A person who can save $12,000 a year for 40 years will have $1.5 million in today’s dollars, assuming just a 5% annual return (which is about half of the stock market’s long term returns). However, a person who can only save half that long, just 20 years, will only have just $397,000. In other words, a person who saves half as long will have 75% less at the end of the period.  That is the power of compound interest.

Now consider the following chart provided by Dave Ramsey.  Ben started investing at 19 while Arthur started investing at age 27.  You may think 8 years might not be much, but Ben will come out $700,000 ahead by time they are both 65, and all other things are equal.  Again, the power of compound interest.

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age start investing chart

 

So You Can Retire Early


Unless you are a self-confessed workaholic, you are probably like most employees who want to settle down before reaching 60. Of course, this can only be possible if you have a comfy retirement fund to rely on, according to an article from MSN Money. If you have deposited some money in your 401(k) account and invested a handful in stocks while you are still young, then you can live the universal dream of traveling around the world, and perhaps retire in a beach house here or abroad afterwards.

In essence, start investing as soon as possible, and invest whatever you can afford.   Pick out more aggressive forms of investments, such as stocks.  Your future you will be extremely gracious of your financial smarts in 30 years.


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