Dispelling an Investment Myth – You Have to Be Rich to Invest

I was participating in an online discussion forum and the topic of investing came up. The person in question mentioned that the capital gains tax shouldn’t be low (they are currently at 15%) because no one would really benefit from such low rates because (I’m paraphrasing):

“you have to be rich to invest.”

Yikes!

I thought that this myth was pretty much dispelled a long time ago. I would argue that the reason that capital gains taxes are as low as they are is because it encourages Americans from all walks of life to invest in the stock market, real estate, and other securities. It would especially be beneficial to those who may end up living on a fixed income later in life.

Remember those film strips in elementary and middle school which covered such topics like safe sex and smoking that seemed just a little bit “dated”? Well, the link below is just one of such films. (Though not in filmstrip form, and no sex--it was 1957). It’s from the 50’s, but I still think the main points still apply. Hat tip to the Get Rich Slowly blog where I stumbled across this (it’s available on YouTube). Check it out here.

If you decide not to click through, the key points in this video (once you get past all the skips and jumps in it) talk about how to invest your money wisely using a dividend re-investment plan, or DRIP. You set aside a certain amount of money each month to go towards purchasing securities, and over time, you can amass a sizable amount of money over time.

Just to be clear, don't think you have to be rich to invest. In fact, the opposite is more often true. People get wealth by investing--investing not only in money, but also in themselves (through knowledge acquisition and giving back to their community). It simply involves balancing risk and not expecting the government to cover everything for you cradle-to-grave.

Change Your Comfort Level

News Flash: People don't like being made uncomfortable.


In the wake of the two boycotts from last week--one by the e-mail chain letter many of you probably received (and will get next spring) and one by rapper-now-blogger Twista, the price of fuel responded in kind—by going UP last week. Note that the two actions are probably not linked at all, but what this shows is that one-day boycotts generally don't work. The most famous boycott I can remember was the Birmingham Bus Boycott, and it lasted over a YEAR.


Thing is, in order for major change (of any type) to happen, people have to change their behavior over a long period of time. Let's use some finance examples. Generally, people don't mind making changes to their financial behavior as long as it doesn't involve a lot of work. So people who haven't really developed spending plans on paper in the past won't do it moving forward. Oh sure, they'll start and may get a couple months into it, but sooner or later it gets annoying and they stop.

Oftentimes, this refusal to change behavior can be taxing to your finances but the perceived cost is not worth the behavior change. A one month gas boycott, for instance, sounds as if it could work... Maybe.

However, people may not be very conducive to using mass transit, biking, or even carpooling to work because it would require a major lifestyle change, even if it saves money. It removes you from your comfort level.


So, what to do? Well, a disciplined lifestyle is the foundation needed. Make a decision and set a goal-meeting timetable. You should also visibly track yourself, which will keep you inspired to go on. More specifically, try to take the tough decisions on how to better manage your money, or try to generate extra funds for saving purposes by taking on more work. Let's face it—gas prices probably won't be coming down any time soon. It's probably best to adjust and adapt while others complain.