Stop Spending! Start Investing!
Unfortunately, many of us cannot put that principle into application because of our poor spending habits. Many people get their paycheck on Friday and then they are broke on Monday. They cash their check or that direct deposit hit and they head over to the mall to buy some new apparel. Then their weekend consists of going to the movies, dining out and “spend, spend, spend.” By the time Monday morning rolls around, their pockets are thin if not completely empty and hopefully, they have already paid the bills.
In order to start making our money work for us, we are going to have to transform our thinking and adapt our ways accordingly. Of course, we are not going to completely stop enjoying the pleasures of life but let us look at money and finances in a whole different manner. Essentially, we have to look at our paycheck as “capital to invest” instead of “money to spend.” Of course, investing your finances can expose you to risk. However, the good thing about capitalism is that if you are willing to risk some of your finances now, you might end up being rewarded exponentially in the future.
The very first and most obvious step in becoming an investor is to enroll in your employer’s 401K program. Many companies offer these programs for their employees to save for retirement. The average rate of return for a 401K is 5-8%. It is small but growing at compound interest, that is still money that you did not have to sweat to get. Some companies also match your contributions up to a certain percentage. Yep! That’s more money that you did not have to exert your own energy to earn! If your employer does not have a 401K program or an alternative, you can speak to a financial institution about setting up an IRA (individual retirement account). With 401Ks and IRAs, you can get an early start on having money in your retirement years so that you would not be completely dependable on social security in your old age.
In addition to saving for retirement through 401Ks or IRAs, you can start making your money work for you by directly buying company stocks yourself. You could go to an actual brick and mortar brokerage but I would strongly recommend opening an account with TD Ameritrade, E*Trade or any one of the many firms that offer online stock trading. Of course, weigh your options concerning each of them but the convenience of online brokerage firms cannot be underestimated.
Now once you have opened the account, what stocks should you purchase? Well, you should always do your research when considering any investment but let me start the ball rolling by going back to what we may spend in an average weekend.
As I said before when many receive their paycheck, they immediately head over to the mall to buy some new apparel. To purchase a new pair of Nike’s shoes, you could pay around $80-120 but as I am writing this, the price of one share of Nike’s stock is $51.55. To buy a brand new outfit at the Gap, you could roughly spend about $60-75 while the price of their stock is $26.44. Instead of buying that brand new outfit, you could buy two shares of Gap stock.
As you go out to the movies on a date, paying for two tickets, drinks and some popcorn which you may end up spending about $30.00 or more, consider that the price of Regal stock is $21.84 and the price of AMC stock is $32.10. Then sit down in the cinema while watching a film made by 21st Century Fox and mull over the fact that the cost of that company’s stock is $28.64 per share.
Of course over the weekend, you may end up dining out a Pizza Hut, KFC, Taco Bell or all three depending on your appetite. All three are owned by Yum Brands and the current stock price of Yum Brands is $63.84.
Now, I am not recommending any of these stocks but I am just illustrating to you that instead of spending your money for an instant pleasure, you could use that same amount of cash to invest in a better future for yourself by using your paycheck as “capital to invest” instead of “money to spend.”
*All stock prices quoted in this article are from December 8, 2016.