The financial decisions we make can be tough, and even more so sometimes because they're so important: Our current and future comfort and security depends on how well we manage our finances.
One good question many of us should be asking ourselves is whether we should be investing in stock now. There are some compelling reasons to do either, so here's a look at a few of them.
2 reasons to invest later
There really aren't too many reasons not to start investing for your future now. You can't be too young, and few of us are too old. The younger you are, the more powerfully you can build wealth. If you sock away just $1,000 at age 15, for example, and it grows at an average annual rate of 8% for 50 years, until you're 65, you'll end up with almost $47,000 -- from a single $1,000 investment. Meanwhile, even if you're 55 and hope to retire at 60 or 65, you have five to 10 years in which you can invest. Socking away, say, $10,000 per year for five years and earning 8%, you'll end up with a rather meaningful and helpful $63,359.
Don't think you can't invest now because you just don't have the money, either. Yes, lots of people are stretched so thin financially that they just can't right now. But many of us do have some ways available to us to save more money and spend less money.
Still, there are a few good reasons to invest later. For example:
1. You're in debt
If you're carrying high-interest rate debt such as that from credit cards, you should investing on a back burner -- but don't stop there. Take actions to get out of debt as soon as you can, because it can be very financially debilitating. Imagine, for example, that you owe $20,000, as plenty of people do, and that you're being charged an annual interest rate of 20%, as plenty of people are. That will have you forking over around $4,000 each year -- and that's just for interest. Note that low-interest-rate debt, such as a mortgage, is far less problematic.
2. You don't have an emergency fund
Next, if you don't have at least three months' worth of living expenses available to you in an emergency fund, focus on getting that established instead of investing. Job losses and health setbacks can happen at any time, and they can be disastrous if we're not able to get by for a while. Be sure to sock away enough to cover all necessary living expenses, including food, shelter, utilities, transportation, insurance, and so on.
4 reasons to invest now
If you've got a well-stocked emergency fund, you're free of high-interest-rate debt, and you have some extra dollars, there are lots of great reasons to start investing -- ideally in stocks, as they tend to offer the most growth potential.
1. Build a nest egg for retirement
Unless you're independently wealthy, you probably need to be socking away money for retirement -- and investing it effectively. Don't assume that much of what you'll need will come from Social Security, because it probably won't: The average monthly Social Security retirement benefit was recently $1,517 -- about $18,200 for the year. Most of us need to build nest eggs that will provide income streams in retirement, and the sooner we start that process, the more we'll likely accumulate.
2. Have a chance of retiring early
If you are in decent shape retirement-savings-wise, you might do even better by saving and investing more, starting now. If you get more aggressive about investing, you may be able to really improve your retirement -- either by ending up with more money and/or by managing to retire earlier than you'd planned to.
3. Live a better life
Starting to save and invest now can make your current life better, too. Depending on how well you do, you may end up with a sizable retirement nest egg well before you retire, at which point you can start directing more dollars toward other purposes, such as nicer vacations, perhaps traveling to Europe or Asia; nicer belongings, such as a fancy large-screen television; and/or a nicer home, by relocating yourself or having some remodeling done on your current home. You might simply start dining out more often or join a better local gym.
4. Improve the lives of your loved ones
Finally, by saving and investing starting now, you can make the lives of those around you better. For starters, you can set a great example for your kids, as they watch you studying companies or funds, investing in them, and perhaps even reviewing your investments' performance together. You can discuss companies together and help them get used to seeing the companies around them as possible investments that can give them secure futures.
If you save and invest as much as possible and are effective at it, you may also be able to support your kids and perhaps even your parents when they need a little assistance. If you end up having amassed more money than you actually needed, you can end up leaving a nice chunk of change to your loved ones.
If you can, take some steps now to begin (or continue) investing for your future. Don't leave any of it up to chance.