Day 22 – Invest In Your Future

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This week, we’ve talked about investing in your relationshipsinvesting in your workinvesting in your health, and investing in your creativity.

It’s finally time to talk about the kind of investing you probably expect a personal finance blogger to talk about — monetary investments in stocks, bonds, real estate, or other financial vehicles.

Investment is such a neat concept. It’s taking money that you own and turning it into yet more money. Even better, it can do it 24 hours a day, 7 days a week, never takes a weekend break or holiday.

Compounding interest is your friend

Investment is such a great tool for building wealth because of something calledcompounding interest. You probably heard about it in school, but might not have paid it much attention at the time.

Simple interest is what happens when you invest an amount of money and receive a return on it. If you invest $10,000 for a year and receive a 10% return, you have $11,000.

Compound interest is what happens when you start earning a return not only on your investment, but also on the interest that accrued since last time. Sticking with our example above, if you didn’t add any money to your investment, you’d start your second year with $11,000. If you received the same 10% return, you’d have $12,100. That’s $100 more growth than the year before, and you didn’t have to do anything at all to get it.

What can you invest in?

Although most people think “stocks and bonds” when they think of investing, you actually have a ton of different investment options. You can invest in:

  • stocks
  • bonds
  • certificates of deposit (CDs)
  • precious metals like gold and silver
  • real estate
  • futures
  • options
  • ETFs
  • and a whole lot more.

Of course, just because you can invest in something doesn’t necessarily mean you should. Collectibles like coins, works of art, and rare books, for example, are such specialized fields that generating a return from them requires a lot of time, effort, and extensive knowledge — unless you’re just particularly passionate about art or books, it’s probably not worth it for the average investor.

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Do your research

When it comes to investing, you need to know what you’re getting into. All investments carry some degree of risk. Sometimes that risk is negligible and minimal, other times the risk is volatile and unpredictable. Riskier investments may have greater potential for return (although this isn’t always true), but they also have greater potential to wipe out everything you’ve invested.

Increasing your knowledge about the investment is one of the ways to prepare and protect yourself from that risk. If you’re planning to invest in a company, learn everything you can about it. What is the CEO or Board of Directors like? How long has the company been in business? Is demand for their protects growing or waning? Who are their competitors, and what are their competitors doing? Statistical information is important, but so is cultural and social information about the company.

Familiarize yourself with all the details of your investment. What happens when you want or need to withdraw your money? What sort of fees or expenses does this investment have that will cut into your returns? How are these investments taxed?

Scrutinize anyone handling your money

Before you agree to do business with a broker or adviser, check them out. Do they have the proper licensing? Who have they represented? How much experience do they have, and how do they get paid? Have they ever been disciplined by a government regulator or sued by a client?

Pay attention to how you came in contact with the broker, too. Did you seek them out on your own? Were they recommended by a friend or colleague? Did they call you up out of the blue, with no explanation how they came to know about you?

The Consumer Financial Protection Bureau and AARP both have some questionnaires to guide you through interviewing a new broker or adviser.

You have a time limit

You can increase your income at any time. You might launch a new business when you’re in your 70s and grow it into a multimillion dollar enterprise, if you have the right idea and the methods to effectively execute it. And if disaster strikes and you lose money, you can generally find a way to make more.

But investments take time to work. Time is finite — once a year passes, you can’t reclaim it. The sooner you invest, the more time your have for those investments to grow, which means more years of compounding interest driving your balance higher and higher.

Should you invest if you’re in debt?

This is always a tricky question, and the best answer for it is “maybe.” It really depends on how much debt you have and at what interest rate. If you have $1,000 that you could either invest or use to pay down the balance on a 22% APR credit card, you’re almost always better off putting it towards the credit card — few investments will gain a high enough return to offset or supersede what the credit card will cost you in interest payments.

The more you pay on your debt, the sooner you get out of debt. When you’re debt free, all of your money that doesn’t go to expenses can be invested.

On the other hand, investing has benefits that debt doesn’t. Some investments are tax-deferred, meaning you won’t pay taxes on that money until you withdraw it. Some investments like your company’s 401(k) retirement plan may come with an employer match — if you don’t invest in the plan, you’re literally saying “no thanks” to give up money that your employer wants to give you.

The best option, of course, is to do both, but that requires more disposable income that some people have. That doesn’t mean its impossible, though. If your primary source of income generates enough to meet your expenses and pay your debt, consider developing a side gig or freelance business in your spare time — you can use that side gig to fund your investments.

Tomorrow: Take A Step Towards A Long-Term Goal

We all have things we want to accomplish “someday,” but unless we take steps towards them today, someday will never get here. Get started on your dreams now.

Are you investing?

Does investing intimidate you? If your employer offers a 401(k) plan, are you participating in it? What aspect of investing do you want to learn more about? Tell us in the comments!

Click here to read Day 23!

Posted in 31 Days To Your Financial Future

Day 21 – Invest In Your Brain

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What’s the single best tool for building wealth that you have at your disposal? It’s not your job. It’s not your accounts, or your savings schedule, or your rental properties. It’s your capacity for creative thought.

Your imagination helps you think up innovative solutions to tasks at work, making you a better employee. It helps you generate unique ideas to propel your business forward. It helps you come up with new ways to save money, and it helps you run your life efficiently. It even provides free entertainment!

Today’s 31 Days To Your Financial Future task is to invest in your own creativity.

Let’s get started.

What is creativity?

So many people say to themselves, “I’m just not a creative person,” but that’s totally not true. Everyone is creative; it’s an integral part of being a human being.

I think when people say “I’m not creative,” it’s because they don’t understand just what creativity is. Creativity isn’t coming up with great ideas out of thin air. It’s not magic. Instead, creativity is a way of observing the world around you, identifying problems or deficiencies or desires, and synthesizing solutions out of the seeds of everything you’ve ever experienced.

Creativity isn’t a finite resource. It doesn’t get consumed and you can’t run out of it. Like Maya Angelou says:

You can’t use up creativity. The more you use, the more you have.

Creativity and imagination is a skill. It’s one we learn and develop as children, but as we grow older, it’s easy to fall out of the practice. The good news is that, like many skills, it comes right back as soon as you start using it.

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Experience everything

Creative thought hungers for stimuli. The more you experience, the more you fuel your own creativity. That doesn’t mean you can get away with a humdrum daily routine and call that experience — instead, make your everyday routine so full of new things that it remains constantly fascinating.

Explore new art. Explore things someone else thinks is art but that you just don’t quite get. Listen to new music, and new kinds of music. Buy something new and unusual every time you go to the grocery store, or finally go into that used bookstore on the corner you’ve always noticed but never actually entered. Visit museums and zoos and parks and monuments. Read poetry or write it. Collect stamps.

Go see the new mural your city commissioned to honor one of it’s cultural icons…and then go see the illegal graffiti local artists painted two streets over. Explore a grocery store where all the labels are in a language you don’t read. Travel, volunteer, engage this little spinning ball of earth and water and all the people on it.

Talk to people and read about them. Read everything you can get your hands on, for that matter.

All this exploration and experience doesn’t have to be expensive. 500px.comand DeviantArt.com are great places to view free art online. Amazon offers free ebooks every single day. Most libraries and many museums and parks are free.

Exercise your creativity

Identify a problem. It doesn’t have to be a big, world-changing problem. It could be a problem in your office or around the house. It could be something in the neighborhood. It could be something related to your finances, like “I want to start putting $100 a month into my IRA, but I don’t have the room in my budget.”

Think about the problem, and try to think of ways to solve it. Try to break the problem down into its component parts:

  • What is the problem?
  • What causes it?
  • Who is affected?
  • What detrimental effects does the problem have?
  • What kind of solution do you need?
  • What sort of time, energy, or expense budget does your solution need to meet?

Try to brainstorm as many possible solutions as you can, even if they’re solutions that seem silly or unworkable. Worry about that part later. For now, just think and let your brain jump to whatever solutions it can come up with. Write your ideas down, or doodle them on a piece of paper, if you need to — the physical action can help get your ideas flowing.

After you’ve got a few proposed solutions, go back over them. Some of them you can probably discard off the top. The plausible ones, though, are ones you ought to try. Don’t try to talk yourself out of it. You know that old phrase “It’s just crazy enough to work?” Some of the best things in life came from crazy ideas — the first person to decide to eat that little white oblong thing that came out of a chicken’s rear had a pretty crazy idea, too.

Creativity needs confidence to be effective

All the creative ideas in the world won’t help you do better in life unless you have the confidence and courage to try them. Creativity is all about experimentation — some of the best ideas you come up with simply won’t work, and that’s okay.

An idea that doesn’t work isn’t necessarily a bad idea. It could be a good idea for the wrong problem. File it away for later and try something else until you find a workable solution for the current problem.

Tomorrow: Invest In Your Future

Okay, I’ve strung you along enough with all this “investing” talk. Tomorrow, we’ll get into the kinds of investments you expect from a personal finance blog — investments in monetary vehicles in hopes of long-term gain.

Do you feel like a creative person?

What sort of things do you do to boost your creativity? Do you ever feel like you don’t know how to be creative? Tell us in the comments!

Photo by Andy.

Click here to read Day 22!

Posted in 31 Days To Your Financial Future

Day 20 – Invest In Your Health

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A few days ago we talked about investing in your relationships and yesterday, we talked about investing in your work. Today I want to talk about investing in something else that’s just as important: your health.

All this talk of building a strong financial future won’t help much if you’re not around to enjoy it, right? Investing in your health ensures you’ll live a long, healthy life to enjoy all the wealth we’re working so hard to build.

Investments in your health can reduce your long-term medical costs, improve your sleep, build your confidence, and provide a wealth of other benefits. It’s no wonder the classic poet Virgil said

The greatest wealth is health.

Let’s get started.

Move your body!

You’ve heard this one a thousand times. Exercise is an important part of health, and aside from you athletic types, most of us don’t get enough of it. Exercise builds muscle, which better protects your body from injuries. It strengthens your lungs and heart. Exercise helps you resist illnesses and harmful conditions. It increases bloodflow to the brain, helping you think clearly, learn new skills, and generate new ideas.

It even helps you sleep better! Before I started going to the gym regularly, I often needed 9-10 hours of sleep every night to feel rested. Once I started hitting the gym 3-4 days a week, I found myself waking after 7 hours of sleep, feeling rested and ready to go. A simple regimen of regular exercise gave me 2-3 extra hours every day.

If you’ve got long-held prejudices against exercise, try to let them go. I’ve always been drawn to sedentary activities. I hated sports and gym class in school (with the brief exception of weight training), and I didn’t even like doing yard work or other physically demanding chores. It wasn’t until I was halfway through college that I learned to love hiking, and only recently that I’ve learned to enjoy going to the gym.

Exercise doesn’t have to mean hitting a treadmill or doing cardio workouts. My parents get their exercise primarily from dancing — west coast swing, line dancing, and other styles. One of my friends lost 50 pounds playing paintball three days a week. There are dozens of ways you can move your body: yoga, martial arts, parkour, hula hooping, dance, jumping rope, and so many more. Find the one that’s fun for you, and do it regularly!

Your shape or your size doesn't matter -- move your body!

Prevention is better than a cure

This is another often-overlooked aspect of health. Preventing an injury or illness is cheaper and more effective than trying to treat or heal a condition after it happens.

A periodic checkup with your doctor can reveal the early stages of ailments like heart disease, diabetes, arthritis, and cancer. It can reveal deficiencies in your diet or identify conditions like sleep apnea that may not be affecting your health much at the moment, but can cause problems for you later on if left untreated. If you have a family history of a condition, keep an eye out for early signs of it, and if you’re ever uncertain about something, check with your doctor.

The same applies to dental and eyecare. Regular dental cleanings can reveal cavities, gingivitis and other conditions before they can seriously damage your teeth, and some serious eye issues can be fixed with corrective lenses if they’re caught early enough.

Of course, unnecessary medical tests can be expensive, so you’ll have to use your own judgment, but generally speaking, if you suspect something is wrong, it’s worth getting it checked out. Think of it this way: would you rather pay a few hundred dollars for a test now and find out nothing’s wrong, or skip the test and find out later that you have a serious condition that will threaten your life and cost tens of thousands of dollars to treat?

These days, insurance providers are covering more and more types of preventative care. In fact, under the Affordable Care Act, insurance providers must cover some types of preventative care without charging copay or coinsurance. Covered screenings can include screenings for conditions like diabetes, depression, and HIV; insurance providers must also cover certain vaccinations like flu shot, tetanus shot, and hepatitis A & B shots.

Mind your mind!

Thus far we’ve largely talked about physical health, but your mental and emotional health is just as important. Untreated depression is the number one cause of suicide. Other conditions like bipolar disorder, generalized anxiety disorder, PTSD, schizophrenia, and addiction provide an extra layer of difficulty to almost every aspect of life; they can make you feel isolated and misunderstood and betrayed by your own self.

The good news is that every one of these conditions is treatable. Every one of them can be managed. Treatment doesn’t necessarily mean medication — it can include simple therapy, exercise, self-reflection and affirmation, meditation, and a whole lot more. Mental health services are covered by many insurance providers, and free and low-cost services are available in most areas. If you’re struggling and need help, reach out to a friend, a teacher, or therapist.

Even if you don’t have a diagnosed mental health condition, you still need to take care of your mental health. Stress is a contributing factor to six leading causes of death: heart disease, cancer, lung ailments, accidents, cirrhosis of the liver, and suicide. We all go through periods where we feel bad about ourselves, where we lose our confidence or beat ourselves up or question the reasons for our existence.

When you find yourself in those situations, take the time to take care of yourself. Learn to recognize the things that you struggle with, and learn to recognize what helps you regain your strength. When you need it, actively care for yourself, so you can get back in control and continue working towards your future.

Tomorrow: Invest In Your Brain

Creativity and imagination are some of the most important tools we have for developing financial success. Like any skill, creativity gets stronger the more we practice it! Tomorrow, we’re going to talk about ways to boost your creativity and how it can help you in your financial journey.

Are you investing in your health?

Do you get enough exercise? Is there an aspect of your health that you’ve been neglecting? Why? Tell us in the comments!

Photo by Stuart Grout.

Click here to read Day 21!

Posted in 31 Days To Your Financial Future