The following is a guest post from William Cowie, a previous contributor to BFS. He blogs about successful investing at Bite the Bullet Investing and you can get his free Investing Basics series here.
Who doesn’t like to have fun? The only problem, though, is finding both the time and money. Remember the old Willy Nelson tune: If you’ve got the money, honey, I’ve got the time?
I remember thinking in graduate school how cruel life is that we either have time, or money, but rarely both simultaneously. As a student I had lots of time for fun things, but no money. Then, when I got a nice job, we had the money, but no time.
So… is it possible to have both the money and the time to have fun?
1. Understand Your Income Possibilities
You have only two possible types of income to live from:
- Income from a job or business
- Income from your investments
Some people get upset when they hear this. Take Betty for example (not her real name). “Surely there are other ways of getting money!” When I asked her to name one, though, all I got was one of those looks: a scowl on the face and smoke pouring out of her ears.
“Well, what about an inheritance?” she finally blurted out.
What about an inheritance, indeed? Can you make a living off receiving inheritances — how many rich relatives do you have, ready to die very few months to keep your bills paid? Okay, she probably was referring to one inheritance. Let’s take that possibility: would you spend it all? After you spend it, how do you continue making a living off the inheritance?
The answer of course is when you receive the inheritance you would invest it and live off the earnings. Right?
Bingo, you’re back to your #2 on that list. No matter how you slice it, you end up with only those two possible income sources.
What about Social Security? If you’re under 50 years old, your chances of benefiting from Social Security are probably right up there with the tooth fairy. Or, what about that pension? Have you noticed how many employers, even government employers, are cutting pensions of people already retired? It’s even worse for people still working. Do you really want to put your trust in something as iffy as Social Security or a pension?
Worse, do you want to wait till you’re 89 to get anything? Because the age at which those benefits kick in moves every year.
2. Decide On A Goal
Way back in the day there was a word they used: retirement. Over the last decade or so, though, that word has slowly been going the way of the 8-track, because of three things:
(a) Longer Life
Healthier eating, better physical fitness and better health care make all of us live way longer than previous generations.
(b) Better Quality of Life
No only are we living longer, we’re able to do many more things than was previously possible. Gone are the days when you received a golden watch and spent the rest of your life playing golf and bingo, with an annual group bus tour thrown in.
(c) Earlier Start
Gone, too, are the days when you had to wait till the magic age of 60 before you could escape your job. Breaking out at 50 or even 40 is moving from the exception to the mainstream, The internet is allowing people to embark on what they REALLY like doing while they still have The Job (Crystal herself, for example) and build up income to support them doing what they like.
The next step of course is getting to the place where you don’t have to do anything for an income, where the income takes care of itself.
THAT is your goal: where you can do anything you want, without HAVING to put in any hours.
That goal is only attainable if your main source of income is your investments.
3. Make a Plan
Your plan has only three components:
- Learn how to invest
- Find money to invest
- Do it
If you’re like us, you didn’t win the lottery of the womb, so you didn’t start out with a mill or two to invest. That means you have to save up to get it. Enough has been said about that, you know what works for you.
The learning part is probably the most daunting for most people. This is where you hear arguments like:
- Wall Street is just a casino, loaded to screw us individuals
- Investing is just too complicated
- I barely have time now, where am I going to find time for that?
With all due respect, that’s all nonsense. Plenty of people have a rental home (Crystal, again) so there’s no need to make it complicated or involve Wall Street. There are plenty of good investing options.
All it takes is a desire and a commitment.
Good News/Bad News
Bad news first: there is no way around it: your future depends on your investing. Period. Sorry to join the person who broke the news about the tooth fairy, but it is what it is.
But there is plenty of good news:
1. Investing is not rocket science
Granted, it’s not doing dishes, either, but millions do it successfully every day. It’s like shopping: just learn the basics and you’re good to go.
2. Learning Is Free
This is the age of the internet: there are countless free resources to learn from.
3. The Miracle of Compounding Gives You Free Money
Also called “interest on interest” — the earlier you start, the more free money you get.
4. It’s Never Too Late
Even if you start investing at 60, you still have a 15-20 year future. (Bet you never thought of it like that!) How much more if you start at 40, or even 30!
5. You Don’t Need Money To Start
You can start learning before you invest your first dime. In fact, that’s probably the best way to go. As you learn, you’ll find yourself getting comfortable with the notion of investing, as well as the concepts that make for success.
Just Do It
Even if you don’t have money this very minute, start learning now. Learning is free for the most part. And the sooner you get started, the sooner you can answer Willy Nelson back: I’ve got the money, honey, AND I’ve got the time!
Crystal’s Comments: I really like the last section’s title – Just Do It. That is the only way any accomplishment is attained, from investing to personal goals. Please figure out your priorities and jump in!