Investing can be a difficult goal to get started.
Many people make shaky commitments to start investing if and when their disposable income increases.The savings from trimming certain expenses may seem too small to make a difference for retirement planning.
These oversights can be avoided by understanding the time value of money. In basic terms, this principle states your money is more valuable today than in the future.
It is a concept that underpins inflation and broader economics, but has practical value for personal finance.
Here is how the time value of money can help you start investing:
Compounding Returns and Time-Your Investment Allies:
Compounding often rewards decisions to start investing sooner than later. Compounding is a great equalizer available to money managers such as Elliott Broidy and everyday investors alike.
Since money has time value, starting to invest regardless of market conditions and pundit predictions is more valuable than waiting for more money or market timing.
You may enjoy higher returns by investing a limited amount now rather than piecing together a larger initial investment.
Having universal value, Isaac Toussie and other real estate entrepreneurs also leverage compound returns for their projects.
Finding the Cash to Begin Investing:
A painless downgrade of your cell phone plan or cable TV package could provide the cash flow to begin investing.
Those receiving income tax refunds are having too much money withheld. Online tax withholding calculators will help you optimize allowances for more money in each paycheck to start an investment portfolio.
Additionally, waiting for lump sum payments such as tax refunds causes emotional highs that commonly lead to impulse purchases.
Low Minimum Investment Options:
Mutual funds, exchange traded funds and direct stock purchase plans are among the investment choices that can be started with fewer than 100 U.S. dollars.
From there, using dollar or poundcost averaging to buy shares through market ups and downs will further boost your portfolio.
Evaluate your time horizon, risk tolerance and tax considerations when making investment decisions. Consult an investment professional as needed.
Summary:
Time is an important consideration for many aspects of personal finance.
From debt reduction to investing, the time value of money can improve your personal balance sheet.
This makes time perhaps your greatest asset of all.
Ah, I remember my first investment. Good times! I do wish I could’ve done something better but I guess we just have to take it as it is and just improve on it in the future.
Great article!