Reasons to Invest: Why to Invest, Other Than Making Money?

Reasons to Invest - Why to Invest - Other Than Making Money

There are many reasons to invest. But, the most obvious reason to invest in the stock market is to profit financially. In simple terms, this happens when the value of an investment increases and is then sold to realise a gain. You can also profit financially by earning dividends or accruing tax advantages. Regardless, the ultimate reason to invest should be to make more money.

Over the past 100 years the global economy has worked in your favor when it comes to stocks. Many individual companies have grown substantially helping shareholders to bank significant returns. Even with recent economic downturns, investing continues to carry a similar potential over the long term. Making money must remain your main reason to invest if you are to capitalize on this potential.

That being said, it’s easy to lose sight of this goal. Investing can be incredibly complicated and making investment decisions is tough. Further, you may find that you have other reasons for investing that can influence your actions and hinder your focus. Do you invest for any of the reasons below? If so, it’s time to take a look at your investment strategy and make sure it’s aligned with the number one reason to invest: to make money.

One reason to invest is to improve self-esteem

Do you want to be a smart business person with great influence? A financially savvy individual who makes lots of money? Many people would answer yes to these questions. Further, people who invest are often portrayed as fitting this image: they are educated people who wear suits to work or day traders on the market floor who spend their day running around, watching quotes change, and making predictions. The assumption is that they are doing their best to make a lot of money in a situation where every second counts. They are at the front of economic change and have great influence.

It makes sense to want to see yourself as someone who invests in the stock market when this is the image that’s portrayed. The reality is some people who invest fit this image, but most do not. The act of simply investing isn’t going to turn you into a smart business person who is financially savvy. Wanting to improve your self-esteem by seeing yourself in this light may cause you to fall prey to poor advice and scam tactics or pay exorbitant commissions. But, the good news is that investing will benefit you financially in the long run if you focus on the main reason to invest: to make money and not get side tracked by wanting to improve your self-esteem.

Another reason to invest is to increase social standing

Cash vs Credit Card: Financial Benefits and Drawbacks

Cash vs Credit Card: Financial Benefits and Drawbacks

Many of you have probably heard about the studies on using cash vs. credit (or debit) as a way to help control spending. Using cash tends to produce the feeling of pain when handing it over to the cashier, where as plastic allows us to be detached from our purchase. We don’t see the money leave our wallet/purse and so the pain is delayed, maybe even gone all together. This may be true for people in average situations, but I argue that a better approach to this situation is to become conscious of your spending habits with credit/debit cards, and not lose out on the benefits that come along with using a card.

Individuals need to be aware of their spending regardless of whether they use cash vs. credit

Using Cash vs. credit shouldn’t be the only way for someone to realize their spending is real dollars leaving their personal economy. Instead of convincing everyone to pay in cash to avoid spending pitfalls, why not examine why people can’t control their spending on a debit/credit card. Check out “Why You Need to Start Tracking Your Spending” to explore the benefits of tracking your money using a budget. If you can track your cash flow accurately you will always have a clear picture of what your spending is doing to your bottom line.

There are benefits that come with using a card to purchase items that cash will never be able to give.

Rewards, cash back, travel points, security on purchases, fraud protection, the list goes on. I strongly believe that credit/debit cards should not be treated differently than cash. You, the consumer, have a finite amount of cash in your account; the plastic card in your hand is only a different means of spending that cash. It does not magically create more money for you to spend on items you can’t afford (technically it does but you will have to pay it back later!). A credit/debit card should only be a different medium for spending the money you already have.

One side affect of spending with cash is the wasted money that literally “falls through the cracks”

Ask yourself this question: The last time you paid for something in cash, and you received change under a dollar, say $0.70, what did you do with it? Did you thoughtlessly leave it as a tip, throw it in the cup holder, place it in your wallet/purse, or let it fall down somewhere on the floor of your car only to discover it 3 months later as your searching for your iPod cord that fell down from the dash. If you were to complete this transaction once a day for a year, you would end up with $255 in change.

This number, while not life altering, could be money spent elsewhere to improve your life. Keep in mind that in my example it was only one transaction a day. What if someone is doing multiple of these transactions a day with various amounts of change that they are throwing around? I am a penny pincher. I will admit it proudly. I keep a bag in my car where I place my change, and then when I am going to the bank to make a normal check or cash deposit, I will bring in my bag of change and put it back into my account.

It is much harder for someone to steal money from a card than from your wallet.

Using a credit card brings with it many fraud protection benefits. If your card is stolen and you notify your bank within the specified time frame your account will be protected from any unauthorized use while your money is kept safe. In contrast, if a $20 bill drops out of your pocket and onto the street, no bank is going to give that back to you. There is no mechanism for protection against stolen or misplaced cash. It is much harder to prove that you did not intend your cash to be used in a purchase then when you use a credit card to make purchases. Credit card transactions provide a level of safety and security in your purchases and put a barrier between your cash and fraudulent activities.

Using cash can mean having to pay cash for the cash you use.

For some consumers using cash means having to pay to get cash, such as from fees at the ATM, cashing a check without a bank account, or getting an advance on pay. These fees are also taking money away from individuals that could potentially be using plastic and not incurring the cost of cash. This is money that could be put towards retirement or quality of life enhancements.

The benefits of paying with cash vs. credit have been studied and articulated and you will likely find people who will urge you to spend with cash as opposed to using a credit/debit card to help save you money and control your spending. I take a different approach. I challenge you to become acutely aware of your spending habits first and take ownership and control of your finances. With the knowledge you will gain on your own behaviors using a credit/debit card will not represent a danger to your financial well being.

You can reap the rewards that come from using a safer way of purchasing things by using a credit/debit card that offers fraud protection and rewards programs. Not to mention, instead of using cash vs. credit, why note make sure your nickels and dimes stay in your bank account and not lodged between couch cushions.