You work hard for your money. You’ve heard over and over that you need to “invest” to make sure your money is working hard for you. If, however, your gut reaction to hearing yet another financial expert tell you to plunge head first into the markets is, “I’m just not that in to you,” you’ve got a point. So why the heck should you invest?
Not Investing Is Like Letting Your Muscles Atrophy
Suppose you come home from work one day and say, “I’ve had it.” You flop on your bed with some munchies and the remote control… and decide not to get up for thirty years. When you finally do stand up, you fall over because your muscles have atrophied due to lack of use. Believe it or not, the same happens to your money if you just stick it under the proverbial mattress (or leave it in a low interest savings account, money market fund, or CD). Literally.
Watch Out For The Financial Termites
The culprit is inflation, which is just the term for prices going up each year. On average, over the past fifty years, inflation has averaged roughly 3%. Suppose you had $1,000 with you when you flopped on that bed. In thirty years, if inflation averaged 3%, you’d still have the same $1,000 when you stood up. However, it would only buy as much as $400 would today. And, that’s if inflation were only 3%. If inflation averaged 5%, your money would only buy as much as $230 would today. Inflation is the equivalent of financial termites munching away at your foundation.
Get Financially Buff
The biggest reason to invest is to make sure your money grows at least as fast as inflation. That’s the equivalent of being able to stay in the same size jeans in your twenties, thirties, and forties. Keeping the status quo. But, if you do a really good job of investing, you can get your money to grow even faster than inflation. That’s the financial equivalent of sporting Michelle Obama arms. Say, for instance, that when you flopped on that bed you put your money into a balanced index fund with a nice mix of stocks and bonds. Suppose it grew at 7% per year. After thirty years, you’d have over $7,600… as opposed to a pile of money that would only buy you as much as $400 would today. The reason to invest is the same reason we go to the gym to work out—to make our (money) muscles as strong as possible.
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