Five reasons why investing in yourself is the best investment that you can make
At which stage are you in understanding or managing finances and investing in yourself? Here is a quick test to gauge your understanding. Answer these questions on a scale ranging from 1 (lowest) to 10 (highest):
- How much do you really know about managing your money?
- Are you familiar with the terms such as net worth?
- Do you know how to read your retirement plan statements?
- Do you know how to invest?
- Do you know how much you are truly giving up by not becoming financially educated?
If your score is below 60, then investing in yourself is the best thing that you can do right now.
Academic qualifications are important and so is financial education. They’re both important and schools are forgetting one of them.
In this article I will break down five reasons why investing in yourself is the best kind of investment for you.
1. It allows you to make your own choices with confidence
There is a myriad of investment advice on the Internet, and so many of these pieces of advice are either just flat out wrong or a cookie-cutter to put you in a box without ever considering your personal situation. How will you ever know what is right?
While investing in yourself you will begin to understand different financial terminologies and be able to distill and implement strategies. As time passes, you will develop the confidence and knowledge regarding when to walk away from information that’s being provided to you versus when the information is really meaningful and can move you forward. You will also continue to learn and to grow because you will see the rewards.
If you are relying on YouTube videos or just pieces of advice given by many different gurus (many of which might be contradictory); you may find yourself spending an eternity spinning your wheels and not being sure about the right answer or what makes the most sense for you. However, this may result positively as well. By taking all this time and investing in yourself, now you have given yourself the power and confidence to make the decision that you need for planning out your financial goals in the long run and start executing on them.
2. It allows you to increase your wealth
This may seem elementary but it is real and incredible. How much you rob yourself of wealth when you do not learn to invest. Every time you pay someone for managing finances for you, this is when you’re taking your money out of your pocket and putting it in someone else’s pocket. The worst part of it, however, is that the financial manager hired by you does not need to have your self-interests in mind. This is very common among the individuals who decide to hand their money over to a financial planner.
|Interest Rate||25 Year Return||Difference|
The chart (given above) shows that if you hand over your money to a financial planner for managing your finances, and he charges a fee of 6.5% on the investment of $250,000 you will be getting $133,000 less than what you would actually have if you decided to manage the finances on your own and get the exact same rate of return. If you were paying a 2% fee, then you would be robbing yourself of $187,000.
When you are truly invested in how to make money and you learn it yourself, then you will see your wealth increase tremendously over time.
3. It allows you to have multiple streams of income
We’re living in an age where there is neither a pension plan waiting for us nor there is job security. Therefore, having multiple streams of income is the way to go if you want to increase your wealth.
Investing in yourself enables you to create many chances. By gaining the knowledge and awareness about managing finances you can start investing in the stock market or investing in real estate or starting a business. All of these become viable options from where you can derive multiple streams of income instead of relying solely on a job that can be taken away from you at any point in time.
4. It allows you to leave a legacy
The legacy building should become a basic thing to learn. We need to start normalizing conversations about money and building wealth while passing on generational wealth. One of the easiest ways to do this is for you to gain the knowledge and start growing your wealth, then pass on that knowledge so that your successors not only get the wealth you have passed on but also the knowledge about building, managing, and continue on growing that wealth for the next generations to come.
5. It allows you to grow your money
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen
Not only does lack of financial knowledge keep you poor but it also keeps you broke. This is because even if you are able to save money, like many other people, you will end up putting it in a savings-account without knowing that a savings-account does not build wealth. Most of the time a savings-account is offering less than the rate of inflation. So, by putting money in a savings-account you will actually lose your money instead of growing it. The only way to grow your wealth is by investing in yourself and managing finances on your own.
Tanya Taylor, CPA, MBA is the founder and CEO of Grow Your Wealth. Her mission is to help professionals and business owners ditch bad debt and create a 6 or 7-figure retirement income by learning how money works in 6 steps so that they can build a legacy without feeling stuck.