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By Gary Bordeaux
Special to the Financial Independence Hub
Money is a consistent focus in the life of an individual. This makes sense, because nothing comes for free, so one needs money in order to get by. Therefore, working for a living is an essential part of participating in society. However, there are means by which one may accrue wealth, and it is wise to invest early and often in order to maximize prosperity later on in life. Proper investment now means an increase in overall financial security. Here are a few ways you can reap the long term benefits of long term savings.
Stocks and Investments
Investing is a tried and true strategy of increasing wealth, but it’s not without its own potentially more substantial risks. Stock trading involves making value judgements and predictions, as the buying and selling of stocks depends on a company’s net worth at the time of a given transaction. This means that there is an inherent risk in buying stocks, as the value may actually decrease and is likely to fluctuate in general.
A keen eye for business trends is an essential part of trading stocks successfully. Likewise, investing directly into a business requires good business sense. Investing in a business has a steeper upfront cost, but this is countered with a more substantial payout. Investments are how many businesses get up and running to begin with, as it provides an alternative to paying that tremendous cost out of pocket. The upshot for investors is that any return on that invest is coupled with interest, though the return itself is never guaranteed.
Retirement Fund
A retirement fund is another form of long-term savings that is focused on end of life security, but the intended purpose is that of providing ample income for retirees so that they can live without financial worries once they have left the workforce. Without a retirement fund, retirement benefits are often insufficient, meaning that one may need to wait much longer to retire safely or come out of retirement in order to make ends meet.
Starting a retirement fund as early as possible is therefore necessary in order to live out your retirement without these concerns. Retirement funds accrue value over time as one makes regular payments, and these payments can be pulled from your paychecks automatically to ensure that the fund is growing. Like whole life insurance (see below), funds can be pulled from the account early as a loan, but this needs to be done purposefully and strategically in order to avoid unnecessary risk.
Whole Life Insurance
The primary purpose of life insurance, as the name implies, insuring one’s life; this means nothing more than providing a payout to one’s loved ones in the event of one’s death. For this reason, term life policies are a sufficient option for many. The “term” in term life insurance is roughly 30 years, but the policy will eventually expire. While this isn’t an issue for the elderly, it’s not conducive to long term planning.
However, participating whole life insurance provides not only indefinite coverage, but also an increasing value proposition over time. Whole life policies are often referred to as “private family banking” because of this increasing value and the ability to take funds from the policy as a loan. Taking a loan against the policy and using the policy as collateral entails a certain level of risk and must be planned carefully, but it provides an individual and their loved ones with tremendous financial freedom if utilized correctly.
While working for a regular paycheck is a crucial starting point, it’s often the end all be all for many, and it doesn’t have to be. Using your wages as a jumping off point for other capital building ventures is a potentially risky endeavor, but one that radically transforms your life for the better. However, many of the methods one can use to increase their existing wealth entail a certain level of risk, and so one needs to do their research in order to profit. With these tips at your disposal, you’re ready to invest in your future with minimal risk and maximum rewards.
Gary Bordeaux is a real estate professional and company owner based in Portland, Maine. As a retired real estate agent, he spends his time and energy investing, and writing about what he has learned. His goal is to help entrepreneurs and small business owners achieve their full potential.
