If you’re NOT like most Americans, you have created a budget, managed your earnings and credit well, and have money set aside in a savings account.

Or even better, you are smarter than most debt-enslaved US consumers, and may have varying tiers of savings, including emergency, event, and long-term savings. You may have even setup some high interest CDs, an IRA or contribute to your 401k with each paycheck.

But what’s next? If you have already set aside at least six months of your income for emergencies, and have funds building up in a retirement or long-term savings account that are liquid, you can now move on to investments.

If you have never invested before, or may have been burned in an amateur attempt at investing in one company’s stock in the late 1990s (and it was technology stock before the bubble burst), then you may be hesitant, or wondering why you should invest money when you can always just earn more and put more away.

Return on Investment

The money sitting in a regular savings account earns about 3% interest, an internet savings account earns about 5% interest, and a CD may provide a 5% return on the amount saved. But inflation lowers the value of your money by approximately 3% per year. Depending on the type of savings account that houses your money, you may actually be losing money over time as the amount you save will be worth less in the future.

However, if you could regularly earn a 7-10% return on your saved funds on average, you would be beating inflation, and building your way to a comfortable post-career lifestyle. The only way this to at least this level of return is through investments of some kind, whether real estate or in stocks.

Putting Your Money to Work

As an employed professional, you can expect that your income will increase over time, but then plateau during your late career. With that in mind, if don’t invest, you can expect to keep working, but have less buying power over time. With no raises in later working years, you will not be able to increase your savings rate. Coupled with decreased buying power due to inflation, you may even have to decrease the amount you save over time.

That being said, now is as good a time as any to start investing. If you’re younger, you have more time to take risks or build a strong portfolio. If you are older, you may have to make up for lost time, but can still achieve a viable portfolio that can take you into your non-working years.

With this in mind, budgeting-help.com offers numerous articles and resources for getting started on investments. Please see “Getting Started with Investing” for tips and tools for initial investments.

Keep in mind that no investments are insured are guaranteed, and there are no strategies that will always ensure returns on investment. Additionally, everyone has a certain level of risk tolerance that will affect their decision making. If you are unsure, you can talk to investment professionals for advice on your investment goals.

References

www.coolinvesting.com. Why invest?

Erin Burnt. A Beginning Investor’s Best Friend

Meredith Picray. How To Start Investing With Just $100

Richard Jenkins. Start Investing With $100

Chris Arnold. Your Money

Fairlie, Robert. “Self-employment, entrepreneurship and the NLSY79” from the Monthly Labor Review.