Why Should You Invest?
The First Problem, INFLATION
How is your savings account looking lately? It’s hard to get excited when the figure staring back at you is between 0.50%-1.35%. With current inflation levels in the UK at 2.50% and even 3.00% at the beginning of 2018, your net worth and spending power are gradually declining.
Unless you work for a generous employer who is willing to match inflation levels, keeping your salary the same, you’re also getting a reduction in your salary every year. Now unless you’re a hardworking individual who is looking to progress in his/her career, you’ll have to work overtime to make up the shortfall each month. If you were on a salary achieving £2,000 per month, we could argue that next year that would only be worth £1,950 unless your employer gave you the 2.50% raise. I guarantee if you opened your payslip and saw a reduction, you would take action immediately. Unfortunately, the effects of inflation mean most people are blind to the damage being done until it’s too late.
The Second Problem, DEBT
Many people live a lifestyle that exceeds what their current salary can afford and most of this is usually down to being given the wrong education. We live in a world that REWARDS people with debt by giving them great credit scores. A simple example of this would be having a car on finance, having a phone contract, or any amount of credit cards. The big one is having a mortgage! A contract you make with your bank that you will give them income for the next 25-30 years, which usually amounts to 100-200% what the home is worth due to the interest being paid.
For many people they have no choice but to apply for “payday loans” with exorbitant interest rates in order to pay a bill on-time, this is a vicious cycle that most cant escape from.
The advice here is to live frugally and adopt a minimalistic lifestyle if possible. The classic saying rings true “spend less than you earn and invest the difference”. Eliminate any debt you currently have as you’re paying interest on things you can buy outright, which will ultimately save you money every month.
Why Should You Invest?
Investing in the stock market gives you the opportunity to grow your money and collect an income while not having to do anything! While you sleep at night, enjoy your day off work, or take a vacation with your family, your money is still working hard for you! Investing is the only way for the “little guy” to become wealthy. If you keep investing and let the income compound by reinvesting it back into the account, it’ll grow to the point where you’re financially free. It will seem small and pointless at first, but within 10 years the growth will start to explode and you wouldn’t believe how fast the income grows.
Don’t believe me? Here are examples of people who earned average salaries and over their lifetime became multi-millionaires.