If I asked you what an investor looks like, you might describe a cocky white dude in a pinstripe suit on Wall Street. You might be right, but you’d also be terribly wrong.
Investing is a great way to build wealth, but it’s not something that only “rich people” do. Contrary to what you hear from the Occupy movement, investing isn’t solely the domain of the “one percent.” In fact, if we use it right, investing can be the most powerful tool that you and I can to build solid financial lives.
If you’ve worked hard to master your money, then you’ve overcome debt, learned to budget your spending and started saving for emergencies and big purchases. All of those techniques are great for dealing with the money that you already have. But the ultimate goal of financial management is to make our money work for us. And when we invest well, we get to watch our money earn more money.
You may be thinking to yourself, “That sounds fine, but I’m not really interested in getting wealthy. I don’t see the need to try to grow my money through investing.” Well, I understand where you’re coming from. It’s not a good thing to run after wealth for wealth’s sake. But investing isn’t about growing a big pile of money to sit on top of. We can use investing to help us gather money that is going to meet our needs later in life.
You see, there are a lot of things that we’ll have to pay for in life, but some of them are decades away from us right now. We’ve talked about using savings accounts to get money together for big purchases, and that’s a good strategy for anything that you may want to buy over the next five years or so. But if you’re trying to save for something that is more than five years away, you should think about investing the money, instead of simply saving it. When we invest, the money that we set aside can grow substantially; over time, the amount of money that comes from the growth can far exceed the original amount of money that we’ve invested out of our incomes.
We’re going to talk much more about investment in coming articles. But for today, let’s look at some of the common things that you should be investing your money for.
- Retirement — You probably won’t want to work forever. Once you retire, you won’t have a paycheck anymore, but you’ll still have living expenses. There was a time when many big companies offered pension plans that would pay their employees after they retired; those days, however, are all but gone. If you want to have enough money to live on in retirement, you need to be investing now.
- Education — The cost of college is staggering, and it continues to rise faster than the overall rate of inflation. It will cost tens of thousands of dollars to send a child to college, and perhaps much more if they decide to go to graduate school. If you plan to help pay for your kids’ education, special educational investment plans allow you to grow some wealth to meet those needs when they reach college age.
- Long-term giving — Generous giving should play a big part in our financial lives. And while it’s good to give a big gift to a charity or a ministry organization, it’s even better to set up a system by which that organization can receive regular contributions year after year, even after we’re dead. We can use investment to set up trusts and endowments that will help to fund our favorite organizations in perpetuity.
- Building an inheritance — You may not desire riches for riches’ sake, but God wants you to build a financial legacy to leave to your descendants when you die. Investing is one of the best ways to do that, and it can continue to pay off for your heirs long after you’re gone.
In coming articles, we’ll talk in detail about all of these different investment objectives, and help to sort out all of the confusing terms and ideas surrounding the idea of investment. Until then, though, think about this: If you had the potential to gather millions of dollars of wealth during your lifetime, what would you use it for?
You see, investing well turns ordinary people into millionaires. Isn’t it time that an investor looked like you?
Photo by Aaron Friedman. Used under Creative Commons License.