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The Power of  Time

 
One way to attain the wealth you desire is by spending less than you earn and to save the difference. Saving is the key to wealth, but there is no reliable method to get rich quick. There are, however, proven methods to get rich slowly over time. If you are patient and disciplined, you can obtain the savings you desire. It might appear that the small amount you save now could not possibly make a difference, but you need to consider the extraordinary power of time and compound interest. The best time to start saving is in your early 20’s as the power of compounding interest at age 20 is much greater than starting at age 40. Below are some key points to consider as you begin your savings journey. 
Build an emergency stash – Start saving an emergency fund so you don’t rely on credit cards, which could only bury you in debt. It is ideal to have an emergency stash of three months of living expenses, but the important goal is to save something.  

Avoid debt for miscellaneous personal items - Save your borrowing power for important necessities such as a car or home. If you are struggling to stretch your paycheck to set money aside for retirement, this is the time to give your budget a major overhaul. Paying your bills should be your number one priority before anything else, allowing you the ability to maintain a good credit rating.  

Get educated – Financial know-how is not genetically encoded and, unless someone has taken the time to teach you about finance, you’ll need to do a self-study. There are many investment options to research depending on your risk level tolerance: savings accounts and time certificates are safe options, while mutual funds, stocks, bonds, and cryptocurrency are options that hold more risk. Make sure to invest your money with someone you trust and know what you are investing in.

Diversify your investments – You can hedge against risk of loss by diversifying your investments.  Don’t put all your eggs in one basket, which could be catastrophic if you lost it all. We suggest investing a little in several products – stocks, bonds, mutual funds, and time certificates. If choosing higher risk options, make sure you’re investing money you can afford to lose. It’s important to have a good understanding of the potential future growth and risk of your investments.   
Sign up for that 401(k) – If you are offered the opportunity and are eligible to participate in a 401(K) at work, do so! There are plenty of reasons to love these plans, but number one is that some employers match your contributions to encourage you to participate. Don’t miss out on that! When you do sign up, the money you save will be automatically deposited into the plan, before it is taxed, so less of your income will be taxed. Most plans also have a Roth option where the money is taxed when it goes into the plan. Put in small amounts to start so it doesn’t seem so overwhelming. Every little bit counts, even $20.00/paycheck or $25.00/month, would add up over time. 

No company retirement fund? Use a Roth IRA instead – If your employer does not offer a retirement plan, the next best thing is the Roth IRA. You’ll fund this with money that has already been taxed as part of your normal paycheck. Money in a Roth IRA that is withdrawn later has the potential to be tax free! Check with your financial advisor each year to learn the annual allowable contribution amount.  
 
No matter what your age, saving is important!  The sooner you begin, the bigger the reward due to the power of compounding interest over time!

Parents and Grandparents... if you have a young family member who should read this article, please pass it on! Contact any UBI office or Jeff Nelson with United Insurance & Investments to discuss various investment options available to you!