Wealth Barriers - Fear, Time, and You?

I spent the last week with some friends in Atlanta, including the authors of the excellent website Brilliant Brown, who discuss different issues outside of your finances. I’ve known these guys for over a decade now, and I can attest that they have some good experience about movie and music reviews, relationships, etc. Click [here] to check them out.

Secondly, if you look over to the right, you will see some results from my Google Reader. There are posts from some of the best personal finance writers, bloggers, and experts around. Basically, you can read what I read and know the breadth of some of my research behind the articles I write.

So this week I wanted to talk about the importance of getting started with investing. Many young people are (unnecessarily) afraid of the Stock Market, or getting into Real Estate, starting a business, etc. So generally, people create excuses for reasons that they don’t participate in these markets or they “invest” their money in “guaranteed” returns, which is notoriously low over the long haul.

For example, some of the excuses we make fall along the lines of:

- I have plenty of time to invest, because I’m only [enter any twenty-something age here].

- It’s too risky to get into the market/real estate. I may lose money.

- The government will take care of us.

- It's pointless to really save money for retirement. You can't take it with you.

There are two big reasons why people progress through life without ever meeting their goals like they want—time and fear. Those of us who are young think that there will always be time to put money away or we think we will always be working (until death). Those who are a bit older are simply afraid to try investing because they may lose their money. Many in this latter group believe that a combination of savings, Social Security, and pensions will fund their later years. Some may have such a luxury. If you’re in your 20s and 30s it’s a luxury you may only be able to read about.

It’s important to note that it’s these reasons paralyze many people when it comes to making the choice to put their money in a better place. Let’s face it: working hard and trying to build up enough money to retire from an FDIC-insured savings account is not going to work. At some point, you have to take risks—that’s how most of those in our society who’ve created their own wealth got it.

So how does one “overcome procrastination and other wealth barriers” (as our title suggests)? Below are some ways—not by any means an exhaustive list:

- Educate Yourself. One way to minimize risk is to learn about the investment world and learn to use the Laws of Averages to your advantage. Read books like the Richest Man in Babylon, The Millionaire Next Door, and even Rich Dad Poor Dad. Most of these books serve as a gateway to investing. Know basic rules like how the historical returns of the stock market have outperformed every major investment vehicle. Know how index mutual funds are the best choice for the risk-averse investor. Peruse websites (like the ones under our “Research Links” to the right).

- Get help. Don’t be afraid to ask people for help. Many professionals are ready to help you, many for free or at a very low cost. Dave Ramsey, a popular personal finance guru tells his radio listeners to find someone “with the heart of a teacher,” who you feel comfortable working with.

- Make the Big (First) Step. Once you’re learned the basics, and how to keep your costs down when investing, set a firm date and go. Don’t try to wait until the market gets to a “safe entry point” for you to jump in. If you research your investments very well and diversify chances are high that you will do very well—usually much better than having your money sit in a basic savings account for a long period of time.

There will be more to come. For more information, check out our archives!

Comments are welcome. See you next week.