Why You Need To Start Investing Early in 2021

Don't be one of those folks who put off investing until their buddies begin to retire. You have plenty of time, but it will be gone before you know it.
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Investing in Stocks & Crypto (Pexels - Anna Nekrashevich)

It's difficult to become enthused about investing while you're young. I mean, there's not much enjoyment in the near term when the fruits of your labor won't be seen for another thirty or forty years. Investing from a young age, on the other hand, is the wisest and simplest method to generate huge money.

So, if you're a young investor searching for inspiration or just wondering if it's a good idea to start investing early, here are my top 10 reasons to do so.

#1 – Your Expenses Are Low

Seriously, when I reflect on my life five years ago, I am astounded at how inexpensive it was. My monthly living expenditures were $400 since I shared rent and utilities with three other individuals. I was paying approximately $200 each month on groceries, $60 on petrol, and $11 on renter's insurance. Aside from that, my costs were kept to a minimum.

My housing prices have nearly doubled since then, my wife and I spend considerably more on food, we have a kid on the way (which I'm informed will add a few more expenditures), and we have added term life insurance to the mix, despite the fact that our renter's insurance is still affordable.

Okay, that was my long-winded way of encouraging you to invest your money while you're still young financially.

“If your costs are ever minimal in life, start investing and watch your money grow” – me

Is there any poetry about money? You probably didn't see that coming.

#2 – The Power Of Compound Interest

Have you ever heard the phrase "put your money to work for you"?

They were, after all, talking about the potential of compound interest. While you may grasp the fundamental notion of earning interest on interest, the most essential aspect is why it matters in your life.

As you begin your professional job, your life will be dependent on your salary. This is how life will continue to be for non-investors.

However, for many investors, especially those who started early, your yearly pay will eventually be surpassed by your investment earnings.

Let me give you an example: if you invest $1,000 per month in a mutual fund with a 10% annual return from the age of 20 to 45 (and reinvest your gains), you will have more than $1 million in assets. That implies that if you get a 10% return, you will earn an extra $100,000 each year simply by allowing compound interest to work its magic.

Even better, if you continue to invest $1,000 every month until you are 65, you will have roughly $9 million. And what's 10% of 9,000,000? 900K.

That's a fairly excellent annual salary, in my opinion.

This is why, instead of relying on a job, people may live off the interest in their assets.

Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” – Albert Einstein

#3 – Valuable Experience

You can't become a world-class painter without putting in a lot of time in front of the canvas. Similarly, if you want to be an experienced and rich investor, you'll need to invest for years.

Experience is the only thing that can replace it. So, why not begin acquiring that experience as soon as possible?

That way, while your friends are learning how to invest and bemoaning the years they should have been investing, you will have the knowledge and expertise of a seasoned practitioner.

Plus, and this is a crucial point, your investment expertise will enable you to see through the falsehoods and con artists that exist.

I'm sure you've seen these criminals before. They're the ones that claim to have created a stock market-beating algorithm. Or, my personal favourite, the ones that claim to be able to share their "secret to rapid wealth" if you pay $250 to attend their conference. (Um... I guess your key to riches is defrauding people of their money.)

Because they've seen the combination of those two things work in their own lives, experienced investors know that time and consistency are the keys to riches. And your knowledge will enable you to see through any falsehoods that say otherwise.

#4 – You’ll Form Better Financial Habits

The start of your financial journey can either be the most perilous or the most advantageous.

This is the period during which you begin to develop financial habits. While the majority of people spend more than they make, take out loans to buy things they can't afford, and open more credit cards because they've been led to believe their credit score is more important than their net worth (I know because I was one of them), you'll be forming good, prosperous, wealth-building habits.

Good investors avoid debt because they want to earn interest rather than pay it. Because they like having money to save and invest, good investors spend less than they earn. And excellent investors develop patience since compound interest will not have enough time to generate momentum if they do not.

#5 – The Investing Bug

When you first begin investing, you are sowing a small seed that has the potential to grow into a full-fledged passion. And once you realize how powerful persistent investment can be, you'll never want to stop.

This is what I refer to as the "investment bug." And the sooner you start investing, the better your chances of catching it.

You'll want to stay up late reading about index funds if you get the investment itch. It will discourage impulsive purchases in favour of increased investment. It will also motivate you to go out and earn more money in order to invest it.

It's the equivalent of contracting a cold. Instead of making you feel bad, it makes you feel energized and affluent. So it's the complete polar opposite of a cold.

#6 – Higher Risk Tolerance

You may take on greater financial risk if you have more time. Why? You have more time to weather financial storms and recessions because you have more time.

Now, I'm not suggesting that 20-year-olds take all of their money and put it in risky, stupid investments. What I mean is that someone who has 40 years before retirement has a better chance of generating money on higher-risk investments than someone who has only five years.

Remember that compound interest takes time to work, and higher-risk investments are no exception.

#7 – Investing Early Leads To Financial Freedom

Have you ever encountered someone who was imprisoned in a job they despised because they were unable to leave due to budgetary constraints? That will never be you if you begin investing at an early age.

One of the numerous advantages of investing early in life is the flexibility it will give.

Simply put, rich individuals don't have to rely on their next salary to make ends meet, giving them the flexibility to follow their passions.

Furthermore, after you've amassed some cash, you won't be making financial decisions out of fear. Your investments will enable you to make confident, attack-minded judgments, which is a luxury that most individuals (who did not begin investing early in life) seldom, if ever, have.

You give yourself the freedom to pursue life boldly and with a purpose by investing early.

#8 – Investing Early Provides Financial Security

You will be safeguarding your financial future if you begin investing at an early age. And let me tell you something: life is difficult enough as it is without the extra stress of being financially unprepared.

To put it another way, early wealth serves as a safety net in the case of a financial disaster.

Now, I know that this isn't the most compelling argument to begin investing early. However, if the day comes when you need to rely on your riches to get by, you will be grateful it exists.

Life is difficult. Invest early and plan ahead.

#9 – Early Retirement

Early retirement is a possibility if you start investing early in life, despite what many pessimists will tell you. So, if you want to retire while still having some spring in your step, you need to start planning now.

Don't be one of those folks who put off investing until their buddies begin to retire. You have plenty of time, but it will be gone before you know it. The sooner you begin investing, the sooner you will have the choice of retiring.

#10 – You’ll Regret It If You Don’t

It may seem trite, but the next 10 years of your life are going to fly past. And if you don't start saving now, you'll be looking back on years of missed financial opportunities before you realize it.

I've been there, and it's an awful experience.

When you invest when you're young, you're making one of the wisest and smartest moves you'll ever make. Not only will you be able to retire comfortably, but you will also be able to live a life of security and independence. At the very least, you'll be developing the types of financial habits that lead to financial success.

So, take a step toward riches and begin investing as soon as possible. Who knows, maybe you'll get the investment itch!

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