Finance planning is crucial. Whether you have little money or tons of money to your name, it’s all the same. Everyone has financial goals therefore everyone needs a financial plan. For some, financial goals may be to donate to a charity every year, or pay for their grandchildren’s college tuition. For others it may be to simply stay afloat and live comfortably. Either way, having a plan will help you reach those goals. And an important option to include in your financial plan is investing.
Now you may scoff. “If I barely have any money to my name, why should I invest in anything!” you say. And we understand where you’re coming from. But finance planning and investment practically go hand-in-hand. Investing your money is a great option to include in your financial plan. Treat your money like you would your children: Would you want you children stuck inside stagnating? Or would you want your children outside playing, learning, and growing? (We would hope the latter).
Do the same for your money. Let your money grow.
There are a variety of ways you can invest your money including:
- Real estate
- Mutual funds
Whether you put a lot in one option, or you do a little in each, it will pay off (literally) in the end. If we haven’t already convinced you that finance planning and investment are best buds, maybe the two points below will convince you of why investing your money is a smart thing to do.
Put your money to work
You worked hard for that money in the bank. You earned it. Now let your money work hard to earn even more. Purchase a quality stock that pays dividends to shareholders, such as Intel (NASDAQ: INTC) or Kimberly-Clark (NASDAQ: KMB). This means that you will be getting a small portion of that company’s earnings on a regular basis!
Another way to invest your money (as well as a bigger way) is in real estate. Now the market may not be wonderful right now, but buying a house is still a great investment. Buy a house, fix it up, if it needs it, and watch its value increase over time. After a while sell the house and get your money back (plus some!).
Compound interest is your friend
Investing money means earning money due to interest. If your financial institution offers accounts with compound interest, you should take advantage of them. Compound interest lets you earn interest on your interest. Sounds scary and confusing right? It’s not. It’s actually quite friendly and easy. With simple interest you make the same amount every year. With compound interest, you earn more every year. Let’s take a look at two scenarios comparing simple and compound interest.
1. Simple interest:
In year one you invest $1,000 in an account yielding 5 percent in simple interest. This means you will earn 5 percent on your original $1,000 every year. At the end of year one you will earn $50 (total: $1,050). After year two you will, again, earn $50 (total: $1,100). By year ten you will have made $1,500.
2. Compound interest:
In year one you invest $1,000 in an account yielding 5 percent in compound interest. This means you will earn 5 percent on your original $1,000 plus the additional interest you will earn each year. At the end of year one you earn $50 (total: $1,050). At the end of year two you will earn 5 percent on the original $1,000 plus the $50 you earned in year one. So instead of earning $50, you’ll actually earn $52.50 (total: $1,102.50). By year ten you will have made $1,628.89.
If you have any questions or would like to get started on your finance planning and investment, please do not hesitate to contact us. We are here to help you reach your financial bliss.