Are you under the age of 30? Do you want to retire before all of your peers? Do you want to achieve financial independence? If you answered yes to all of these questions then you are on your way to becoming financially independent. If you’re young and haven’t started investing yet, you’re not alone.
Young people don’t save
Many young people hesitate when it comes to investing. Fear is one of the biggest causes of that hesitation. These initial fears are common in young investors. You worry because you are young, and you don’t have that much money as it is. You worry that you are going to lose money. You’re worried that all your hard earned money will vanish into thin air and you’ll have nothing to show for it. All financially independent people have been there before. It is difficult to get started. The first thing you need to address are these fears. Limiting beliefs will prevent you from ever becoming financially independent. In order for you to get on the path of financial freedom, you must first conquer your fears.
Fear of Loss
Young people don’t have a whole lot of wealth. That is a fact. Unless you win the lottery or are reborn as Mark Zuckerberg, you’re not going to be young and rich. Do not let your lack of wealth prevent you from investing your money.
A lack of wealth will hold you back from investing. Why? It’s simple really: losing a small amount of money will hit you a hell of a lot harder than it does someone who has stacks on stacks of money. As a result, you don’t invest anything at all when you are young.
Why are you afraid?
The stock market crash of 1929. Enron. WorldCom. Bernie Madoff. The Great Recession. Why should you feel comfortable when you consider all of these events that occurred in the past century? Your fear stems from the fact that we don’t want to lose your wealth. You don’t want to lose what little wealth you have as it is. I mean, what if you are a part of the next market collapse or scandal? Instead of taking that risk, you would rather hold onto your cash then even take this marginal risk of losing everything.
Your fear of losing money will always lose you money
Instead of risking the loss all of your wealth, you decide to sit on your money. You can’t lose money in the bank, right? Money in the bank FDIC insured up to $250,000 so you should be fine, right?…WRONG. When you account for inflation, sitting on your money is the absolute worst financial decision you could make. You are guaranteed to lose money when you just let it sit in the bank, no matter what.
Are you willing to lose two to seven percent of your wealth a year?
Nobody likes to lose money. When you sit on your cash and keep it in a low interest bank account you are guaranteed to lose at least two to seven percent a year. How you figure? Well, the average inflation for any ten year period since 1940 has been two to seven percent. In addition, the average annual inflation since 1913 has been 3.22%
What does this mean to you?
Your dollar becomes weaker as time goes on.
For every $1 you let sit in the bank for the next year, it will be worth about today’s equivalent of 97 cents next year. If you let that same $1 sit in the bank for five years, it will be worth today’s equivalent of 85 cents in five years. If you let that same $1 sit in the bank for 10 years, it will be worth today’s equivalent of 70 cents in 10 years. So on and so forth.
Don’t let your fear of loss stop you from investing. If you want get on a path of financial independence, you need to begin investing today. You may be young and anxious when it comes to making investment decisions, but you are not alone. Remember, being too fearful of losing money will ultimately cost you in the long run.
In my next article I will go into more detail about the long term impact of in investing at a young age and how you can become a millionaire with just a few simple steps.