March 24: Investing An Approach to a Restful Future

by David Jenyns on March 24, 2007

In today’s unsure society, it is extremely important to develop a financial plan that will not only help your current situation by easing your mind about the future, but will also help to ensure that your retirement is a time of well deserved rest and relaxation. By investing money, you are creating a situation that will enhance your way of life as you commit your money for a specified period of time with a risk for the purpose of gaining a financial return. With any type of investing, there is a risk ranging from minimal to maximal, however, your main focus should be on making as much money as possible in a short period of time without losing any of the principle amount that you originally began with. Many people are afraid to invest after they learn that there is a risk involved, but the more you become educated about investing, the easier it is to make knowledgeable decisions about your money.

Being aware that risk is involved in investing does help to make an educated decision about your money, but the degree of risk involved is dependent on the option in which you choose. You must be aware that, as the old saying goes, “if it sounds too good to be true, it probably is!” Therefore, you should not invest into any program that will keep you worried and stressed about your money.

When choosing to invest your money, one issue of the utmost importance is that of time. Timing is the essential element to investing that is the determinant as to whether you accumulate money or not. The sooner you begin to invest your money the sooner you begin to make money, thus, when the time comes to use your collected lump sum, the greater the return on your investment. For example, if you begin to invest money when you are twenty years old and your friend decides to wait until he or she is thirty years old to invest their money, in the long term, you will have made the most money through your investment due to the fact that you began 10 years earlier. Therefore, it is important to begin investing as soon as you are financial able by having a solid financial foundation, meaning that you have money left over to invest after you have paid all of your present financial obligations.

In the financial realm, with investments, there are numberless options to choose from, hence the reason you should become educated before investing any of your money. With any option that you choose, you need to make sure that there is a minimal to moderate risk level in exchange for a reasonable rate of return (or the percentage rate that you earn on each dollar you allocate toward your investment fund). You should also make sure that your first investment plan is qualified by the IRS so that, as an American, you gain certain tax advantages when you decide to participate in a long term investment opportunity. By doing this not only do you gain the immediate reward of tax advantages, but you are properly ensuring that your future is planned for.

It is impossible to accurately calculate the exact amount of money that you will need in order to retire to meet your standard of living (the amount of money that you require to live comfortably). However, it is critical that you obtain an approximate figure for your retirement so that your standard of living does not suffer and you will have a better idea as to which investment opportunity is ideal for you. To do this, you must determine how much you currently earn per year and figure 70-80% of this amount, which will become your annual income when you reach retirement.

For example, if you currently procure $100,000 per year, 75% of this amount is $75,000, which is a logical representation of your retirement amount. In order to generate this retirement, you must take 5% of your current income of $100,000, which is $5,000 and invest this amount monthly until you retire. Once you begin investing a set amount monthly, be sure to check in occasionally to ensure that the total you are investing is helping to reach your desired amount and adjust accordingly.

Again, with any decision involving money, investing is just another subject, in which it is extremely beneficial to become educated so that you are able to ensure a successful retirement for you and your family.

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