Most of us need to work in order
to get money. But your money can also work for you. In fact, your money
can do most of the work to help you retire comfortably if you save and
invest consistently. Here's how to make your assets propel you to a
secure retirement.
Start saving.
The first step is to save a portion of every paycheck in a savings or
investment account. Your money can't begin to work for you unless you
set some aside for the future. Putting the money in a retirement account
can help it grow even faster without the drag of taxes.
Savings snowball.
Once your money starts to generate returns,
that amount will be added to your savings and generate its own returns.
If you don't spend the income from your investments, the extra cash
makes your original ball of savings even bigger. You can also add
windfalls such as tax refunds or bonuses to your pot of savings to make
it grow even faster. Plus, you can always find ways to make extra money to add to the investments.
Money works nonstop 24/7.
As long as you leave the money in the account it will continue to work
for you. Equity valuations can be pretty volatile, but the long term
trajectory is always up because the global economy as a whole is always
growing. In addition, many investments pay out cash regularly in the
form of dividends and interest. You get paid even if you don't do any
work. As long as you don't raid the accounts, your money will work for
you.
In some cases having money can cost you money. You might need to pay a financial adviser to help you manage it or end up invested in an actively managed mutual fund where a fund manager takes a cut of the profits to help you manage your stash. However, you can always minimize the fees by investing yourself using low cost index funds. Pay careful attention to the expense ratio and other fees associated with each investment you select.
Create a passive income stream.
If you save and invest for long enough, your investment returns may be able to replace the income you earn by working.
The money you have in an investment account can be used to build
passive income. As you make long term investments with your money
consistently through the thick or thin, the amount of money you have
invested will continue to grow. As you accumulate wealth, you build
passive income to a point where work is optional. I've been saving and
investing for a couple decades already, allowing me to routinely turn
down lucrative work opportunities that cut too much into my family time.
The key is to understand how equity markets work and to develop a long
term game plan so you don't panic and sell at the next inevitable stock
market crash.
Getting
money to work better for us is actually relatively easy. Relatively new
innovations such as low cost index funds and discount brokerages are
making investing more affordable than ever before. It's reducing
spending and saving more that is extremely difficult
for some people. If you make an effort to manage your own investments
and minimize fees you will be able to invest even more efficiently and
effectively. Many of us work very hard to earn our paychecks. Saving
that money and investing it consistently can make your money generate
returns for you.
If you save and invest for long enough, your investment returns may be able to replace the income you earn by working. The money you have in an investment account can be used to build passive income.
ReplyDeleteExactly what I have been saying!
ReplyDeleteHi CW,
ReplyDeleteI think for investment returns to replace my current salary, i think i need a really huge investment portfolio. Haha
Quite true for high income earners.
DeleteI have been telling my closer colleagues that my investment income easily beat my year-end bonuses. (actually my bonuses are not high) LOL!