If you look hard enough, you can find many obscure holidays, but few of them can instantly capture people’s interest as much as Be a Millionaire Day, which is “celebrated” on May 20.
While amassing a million dollars may not be as significant a milestone as it used to be, most of us would still feel pleased if we could someday attain “millionaire” status. While there are no perfect formulas or guarantees, here are some steps to consider when working toward any investment goal:
• Put time on your side. The earlier you begin saving and investing, the better your chances of reaching your financial goal. You can’t expect to “strike it rich” immediately with any single investment, but by investing year in and year out, and by choosing quality investment vehicles, you have the opportunity to achieve growth over time.
• Pay yourself first. If you wait until you “have a little extra money lying around” before you invest, you may well never invest. Instead, try to “pay yourself first.” Each month, move some money automatically from a checking or savings account into an investment. When you’re first starting out in the working world, you might not be able to afford much, but as you advance in your career, you can increase your contributions.
• Control your debts. It’s easier said than done, but if you can keep a lid on your debt payments, you’ll have more money to invest.
• Take advantage of tax deferral. When you invest in tax-deferred vehicles, such as a traditional Individual Retirement Account (IRA) and your 401(k) or similar employer-sponsored retirement plan, your money has the opportunity to grow faster than it would if placed in an investment on which you paid taxes each year. Of course, when you start taking withdrawals, presumably at retirement, you’ll have to pay taxes, but by then, you may be in a lower tax bracket. And since you’ll have some control over your withdrawals, you can help control taxes, too.
• Build share ownership. As an investor, one of the best things you can do to build your wealth is to increase the number of shares you own in your investments. So, look for buying opportunities, such as when prices are low. Also, consider reinvesting any dividends or distributions you may receive from your investments.
• Don’t be overly cautious. For your money to grow, you need to put a portion of your investment dollars in growth-oriented vehicles, such as stocks. It is certainly true that stock prices will always fluctuate, sometimes quite sharply, and you may receive more or less than your original investment when sold. But if you avoid stocks entirely in favor of more stable vehicles, you run the risk of earning returns that may not keep you ahead of inflation. As you approach retirement, and even during retirement, your portfolio will probably still need some growth potential. Work with your financial advisor to determine the appropriate approach for you.
• Think long term. By creating a long-term investment strategy and sticking to it, you’ll be less likely to take a “timeout” from investing in response to perceived negative news, such as market downturns and political crises.
Following these suggestions may someday allow you to reach your financial goals.
This article was written by Edward Jones for use by Laura Evans, Edward Jones financial advisor of Richmond Hill.