Invest For The Future
Investing Is Planning For The Future
Rather than living month to month or paycheck to paycheck, it is wise to have a plan for the future.
In general wealthy people have a financial plan and poorer people have no plan.
What is Jesus expecting us to do with our money?
Are You Growing Your Money?
If you simply save your money in a bank account, in the future it will not be worth as much due to inflation.
It is our job to educate ourselves on different ways to invest and grow what God has blessed us with.
Name Your Investment Areas
Some common areas that you will save or invest in
-Buying a house
-Sending kids to college
Studies show that when you give a name to your savings (vision) you are much more likely to stick to it.
Should I Save Or Invest?
In general if you won’t use the money for 5 years or longer, investing will give you a greater return than a savings account.
What Types of Investments Are there?
If you are investing for the long term and assuming an average amount of risk, the most common forms of investing are “mutual funds”.
Riskier forms of investing are individual stocks, and safer forms of investing are bonds or bank deposits.
Other types of investing are starting or buying a business or buying real estate.
Whichever type of investing you do, you should always do your own research.
Historically the S&P 500 Index Mutual Fund has returned an average 11~12% per year for the last 40 years.
Dave Ramsay recommends to diversify your mutual funds into 4 categories:
-Large Cap (Blue Chip or Large Companies)
-Medium Cap (eg. S&P 500)
-Small Cap (eg. Russell 200)
Each country usually has tax free accounts for long term investing which you can use to avoid taxes.
In Japan the most common accounts are:
-Standard Securities Account – withdraw anytime, Tax (~20%) on gains
-NISA Account – withdraw anytime, 5 years Tax Free Investing, No Taxes on Gains
-Junior Kids NISA – withdraw only at 18 years old, 5 years Tax Free Investing, No Taxes on Gains
-iDeco Retirement Account – withdraw only at 60 years old, Tax Free Retirement Investing, No Taxes on Gains
Buying A House
It is good to have at least 5% and preferably a 10% or more down payment to get the best interest rate for a home loan.
Don’t buy a house if you still have other debt, as you may run into trouble when you don’t have enough money to pay for repairs or taxes.
A good rule of thumb is to invest about 15% of your income for the future when you will not work.
You will need to have saved 10-12 times your desired income at retirement, to be able to live on drawing 8% from your investments.
Take care of your own future, and if the government helps with a pension etc., consider that a bonus.
Retirement Investment Goals
If you invest 10,000 yen ($100) each month into mutual funds returning 12% each year, in 40 years that will become over 100M yen ($1M)!
If you simply saved that same amount without investing, it would be $48,000.
The earlier you begin investing, the longer time it has to compound.
As college is expensive, it is a good idea to begin saving when kids are born.
You can calculate how much you will need, and start investing now to reach that goal.
For example, to reach 7M yen in 18 years, you will need to invest 20,000 yen / month for 5 years and then let it grow for another 13 years.
Or you could invest 10,000 yen / month for 18 years to reach 7M yen.