When we talk about investing, time is a crucial factor as interest rates work best if they are given a longer duration to grow and compound, but our current younger lot which has been mired in materialistic desires to the extent that they are not left with much to save from at the end of the month, seems to be devoid of this amazingly beneficial habit.
Financial security is not just a buzzword, it’s a reality which beckons us even if we look at it with interest or not. Nowadays, bigger financial concerns for every individual consist of things like buying a house or having a retirement plan which they could thrive off and make way for an easier living pattern. Being in your 20s allows you to have the time on your side when you invest and you are allowed a higher window of saving because you are still not burdened that much by the weight of responsibilities which makes it highly difficult to save when you want to later in your life. While leaving college, one must pursue the habit of investing a chunk of his/her salaries to provide for a buffer to fall on in hard times and prosper in a good one. Here are some amazing guidelines to unlock the potential benefits of investing as soon you start earning after college:
You have a higher risk-absorbing capacity
Financial instruments which come with a high risk attached to them but they also deliver higher returns than conventional ones. As people get older, they shy away from indulging in these kind of risky endeavors as they have a lot of financial responsibilities to cater to but young people have this advantage of being able to absorb risk if it happens because they have plenty of time to resurrect themselves financially if the investment ends up being a dud, in return enjoying a much higher return than other people if its comes off.
You can benefit immensely from the use of compounding:
The timing is highly crucial in deciding where you end up in terms of getting a substantial return when a certain investment matures. When you have time on your side, compounding can come to your help by multiplying your investment for a longer period of time and ensuring a bigger return on your initial investment. This opportunity starts eroding with age and the longer you take to make an investment, the lesser amount you will accumulate at the end of it. A prime example of this scenario is the Sage of Omaha himself, Mr. Warren Buffet who thrived off the benefits of investing early and saw himself bludgeon into the elite league of the World’s Richest People.
You can remain free of debt:
Most of us, when committing to big purchases, rely on loans to finance them increasing not only the overall cost of the purchase but also making it difficult for us by facing the immense burden of committing ourselves to paying the monthly installment for an extended period of time and face the scenario of spending our future income even before we have earned it.
When you are young, you can save and invest your money into resources to be able to easily buy whatever you want like a home or a car easily when the time has come. Also, if you can muster up a decent amount and invest it, you could use that money to pay off your student debt instead of defaulting on your student loan.
Improving your financial skills:
Your habits define who you end up as the same holds true for starting to inculcate the habit of investing early in your career as it will allow you to bring discipline in your spending patterns and make you commit yourself to saving first and then get down to adjust your personal and living expenses accordingly. Those who start saving and investing early, benefit immensely when their own income starts to grow because now there is an addition to the monthly income rather than a deduction which most people face nowadays. If you want to grasp a luxurious lifestyle for yourself in the long run, then this habit is it and it will ensure that you reach that mark earlier and in an easier manner than your contemporaries.