Investing for Beginners (Investing 101)

September 30, 2013

What is investing?
Investing is setting money aside today in order to receive more money in the future after inflation.

Who should invest?
If you have no debt and have an adequate emergency fund, you should invest. Generally speaking, an adequate emergency fund is three to six months of living expenses.

Why you should invest?
Money sitting in a savings account is a guaranteed way of losing purchasing power due to inflation.

Here are some what some things cost in 1963:

  • Car: $2,300
  • House: $19,300
  • Gas: $0.30
  • Bread: $0.21
  • Gallon of milk: $1.04
  • Stamp: $0.04
  • Coke: $0.05
  • McDonald’s burger: $0.15

When should you invest?
Now!!! To see how much $100,000 can grow to over 30 years, please see the table below:

1% avg return per year 3% avg return per year 6% avg return per year 8% avg return per year 10% avg return per year
Now  $100,000  $100,000  $100,000  $100,000  $100,000
30 years from now  $134,785  $242,726  $574,349  $1,006,266  $1,744,940

As you may have noticed, a few percentage points make a big difference. In the early years, you may not notice a difference, but in the long run, the difference is very significant. Think of this as if you were rolling a snowball down a mountain. Rolling a snowball in a savings account is like rolling it in a flat part of the bunny slope.

Where/How should you invest?

Stay tuned. More posts to come.

Ask yourself, “What is holding you back from investing?”

If you have any questions, please leave a comment so I can answer it on future posts.

To learn more about getting out of debt, establishing an emergency fund, and different types of investments, please subscribe to the blog.

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