Investing is the idea of putting current money or resources towards something today with the calculated expectation that you will get more back in the future. When you invest, you are substituting current consumption for more future consumption.

You might invest in going to college or learning a trade. This takes time and money, but you hope to be rewarded with a larger paycheck when you are done. Time is one of your most valuable assets. Taking time to exercise or build a budget can be hard work, but they’re free and have substantial returns.

More traditionally, a financial investment involves buying an asset or assets that will grow in value over time. Investing differs from saving in that you expect a higher rate of return, and you take on more risk. Generally, the higher return you require, the greater the risk. This is why most investments that sound too good to be true, are too good to be true.

Investing is a critical piece of the millionaire map and serves as your turbo booster towards financial independence.

A quick illustration to prove the point:

Investing $1,000 per year for 30 years with an average 7% return will give you nearly $100,000. However, saving that same $1,000 each year, even at a generous 1.5% interest rate, will leave you with under $33,000 after 30 years. On the other hand, the savings return is guaranteed while the invested amount could decrease below the $30,000 contribution with bad investments or bad luck.

More posts about investing continue below…