Why You Need a Personal Investment Plan – Right Now

There are several reasons to start a personal investment plan, ASAP. The bottom line is that if you are spending everything you save, then you work is not leading you in the right direction. Eventually, you will want all of your income to be from your investments so that you can enjoy all of your time with family, friends, traveling, or on whatever you so please. To break it down there are several reasons why this matters.

Reason #1: You NEED to have a long-term plan

Have you thought about the things that you want to do in your life? Do you want a nice home? Maybe a second? A family? To travel? Money is important for all these amazing gifts that life has to offer. So this will make you think about what you need to start doing now to build your wealth rapidly.

Savings: The first step in building your investment plan will be to have a savings plan. You cannot invest what you don’t have, so saving is the first step. Calculate your monthly cash income (literally the cash that comes into your bank account each month). Then break out your expenses is detail: Rent, food, and fun activities, traveling, healthcare, etc. Can you save $500 per month based on that? That is a nice start.

Now, start investing that $500 every month into an index fund, which we have discussed elsewhere on this site. A good place to start is Vanguard.com where you can invest in their primary S&P 500 index fund, which tracks the 500 largest companies in the US by market capitalization. The ticker is VOO. Since inception about 15 years ago, the index has returned around 11%. Over the long term, it will probably yield closer to 7%, but over time this will still add up a lot!

We have posted an article on the site about careers, which are an extremely great spot to help you save long term, allowing you to invest more and more, so check it out!

Reason #2: The money will not materialize magically when you are 65:

Per the point above, you need to start thinking about this now. Don’t let it stress you out, but you’ll want to save a bit here and there each year and continue to increase that overtime. If you simply keep “enjoying life” with no savings or investing, you will not have passive income appear when you are old. The interesting thing is that saving even a few hundred each month can eventually materialize into over one million dollars when you are older (around 65).

Reason #3: Life is better when you have free time

Passive income is the goal folks. If you have your money invested in an index fund, even with a 2% dividend, you are still looking at thousands of dollars of passive income per year, which can help pay the bills. Ideally you can build up at least a few million dollars and you’ll be able to live a decent lifestyle without working at all. This is the power of investing; it keeps compounding every year.

Reason #4: Opportunities will arise throughout your lifetime

As you start saving and investing conservatively, you may see opportunities for a business or for real estate investing, which can generate you a much higher return. Full disclosure that you should do your full diligence on any investments like this, but no doubt that once you have a good chunk of change saved, you can start to look at some long-term alternative investments.

Reason #5: It feels GOOD:

Once you start saving and investing, you will realize that it feels great and it becomes a habit. It is a very difficult thing to do initially and it will feel like you are making no progress, but then all of a sudden that stock market corrects, allowing you to invest, and you make 50% in one year, and boom you see improvement just like that! You just need patience!

I want to remind everyone that you should still enjoy the journey and prioritize your health as number 1. The good life will fall into place if you focus on improving yourself everyday.