Wednesday, June 21, 2017

Why Investments Are the Best Route to Saving Your First Million

Earning your first million is an incredible milestone. It feels like you’ve accomplished something incredible in your life and that you’ve gained entry into an exclusive club that very few people are allowed entry into. Seeing those seven digits when you total up your assets and savings will fill you with joy, but until then, you’re probably stuck working a silly job and trying your best to scrape by from paycheck to paycheck.

Let’s face it, as much as we dream, it’s difficult to actually earn that first million because we don’t know how. This guide is here to tell you that if you want to make your first million, you need to break away from the shackles of a typical working life and start investing your money.

Why working is a difficult path to your first million

One of the issues with your typical day job is that you’re limited in how much you can earn. Let’s say you work a 60 hour work week and earn $30 per hour. That would be an estimated $93,600 salary per year. Now let’s divide a million and we end up with around 11 years. If you saved every single penny and didn’t spend anything for 11 years, you will have saved up a million dollars. Now let’s bring it back to reality and realise that you can’t realistically save up every penny because you need to pay for rent, taxes, utilities, repairs, food and so on. What you end up with is a small fraction of that money that you can actually save up. Sooner or later, you’ll realise that working makes it almost impossible to save up a million dollars, and you need to break away from your job in order to get it.

However, let’s use another example. Let’s say you are on the higher end of the spectrum. According to this article, one of the highest paying jobs in the United States pays out roughly $246,320. If you saved up every penny, then it’d take a little over 4 years to accumulate a million dollars in total earnings. Not too shabby. But again, much of that will be taxed, a lot of it goes to rent and other necessities, and you’ll end up spending well over a decade in order to save your first million dollars. Not to mention the job itself will be taxing and requires years of study and practice in order to reach that level.

Let’s also not forget that 60 hour work weeks are incredibly tiring, and that’s considered the lower-end of the spectrum. You won’t have as much time as you’d like to spend on yourself, you can’t really indulge in holidays or luxury purchases, and much of the money you save will eventually be used for nothing. Long story short, working is perhaps the worst path to saving your first million because you’re limited by the amount of income you can earn. Even if you work extra hours and you’re paid a generous hourly wage, you’re still restricted with how much you can earn. In order to break out of these limitations, you need to look towards investments.

Why investing is the better path

One of the first benefits of investing is that there’s no cap on how much you can earn. With a job, you’re limited by how much your employer sets and even if you work extra hours, you can only earn a little more than the standard set. Even if you wanted to work 100 hours in a week, you’re still going to have an upper limit on how much you can earn, not to mention how much effort that’s going to take. With investments, you could technically earn an entire year’s worth of your current wages in just a single week—and that’s not an exaggeration! Your business could potentially be worth millions or even billions if you put in the time and effort to nurture it. Just take a look at famous CEOs such as Mark Zuckerberg who currently has a net worth of around $63.8 billion. Facebook was founded in February of 2004, so it’s taken roughly 13 years for Mark Zuckerberg to reach that level of fame and fortune. Most people are lucky enough to even earn a slice of that in the time he has spent growing Facebook, and it just goes to show that investments really have no upper limit for income.

In addition to having no income limit, you also have no real constraints. Unlike a regular day job where you work from 9 to 5 or similar hours, investments mean you can pick and choose when you work. This has two advantages. Firstly, it means you can set when you want holidays and you are never restricted to a schedule. Secondly, it means that if you do need more money or want to work harder, your efforts aren’t wasted. It’s not uncommon for investors to spend more hours than a regular job analysing and planning their investments but it also means that once you’re settled into the industry, you can continue making money without much input at all. It really depends on what kind of business you run, what kind of investments you make, and the types of income you are earning. For instance, owning a block of apartments means you simply collect rent and occasionally deal with tenant issues. However, owning a business can be a lot more work since it requires a certain level of dedication and commitment to ensure it’s running optimally. If you simply just trade shares with your investment money, then there’s less work required but the more you know about the industry and the more news you look at, the better your chances of success.

The best types of investment to get involved with

There are three main types of investment that are easy to get into without too much work. Granted, it still requires a lot of research and understanding, but not as much as some of the more financial methods of investment.

First of all, property development is a form of investment that many people can get involved with because they have an understanding of how property works. You simple look at a new house for sale, renovate it, then sell it for more money. It requires very little input assuming you have the money to hire contractors and designers, and most of it is handled by estate agents. However, the more work you put in yourself, the less money you have to pay third-party services and the more profit you earn. Fortunately, as long as you still make a profit even while hiring other people, you can continue buying and selling property in order to make money.

Another popular form of investment is in stocks and shares. You essentially pay money to own a small portion of a company and whatever profits they make are split with you depending on how much of a company you own. The profits might be small to start with, but they can grow exponentially depending on how well the company is doing and how much of a share you have. This requires a lot of research and a deep understanding of how your chosen industry operates, but the potential for income here is staggering.

Whatever form of investment you pick, make sure you’re doing your best to research it thoroughly. Making your first million is difficult and requires a lot of hard work and dedication, but you can get a head start by learning about investments instead of struggling at your day job.

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