LOUISE FAIRSAVE: Financial heroes
Mon, April 30, 2012 - 12:00 AM
In the spirit of National Heroes’ Day bank holiday, a friend asked how could she do something heroic about her finances. Is it possible for the ordinary working woman to make a million dollars? This article attempts to answer these questions and to give a simple example.
If you want to do something heroic about your finances, I assume you would want to generate outstanding financial results for yourself, your immediate family and/or your community. These results would significantly and extraordinarily improve the financial future.
You would be holding in mind a vision of what life would be like if you were successful. You would not necessarily be interested in being a pioneer or in making a high-risk/high-return investment. You would be quite willing to try the same approaches as other people before you. The test will be the level (or the excellence) of results achieved.
In addition, you would have recognised that heroic results usually require noticeable sacrifice. Here then are some pointers to simple, working woman’s heroic success with finance:
• Start early — the earlier, the better.
• Live with thrift during your youth and early adulthood. Live well within your means.
• Save consistently from your first pay cheque.
• Invest a fixed portion (not less than 10 per cent of your net pay) of your savings for the long term.
• Never draw on your savings/investment.
• Seek out the highest interest rate your personal risk aversion can tolerate. Avoid get-rich-quick schemes and other high-risk investments.
• Make the income tax laws work in your favour.
The following is an example. By way of explanation, Lenda applied the pointers and achieved heroic success. Lenda started earlier, while she was only 19. Thrifty in her youth, she saved consistently, investing a fixed amount regularly for the long term. She never drew out any cash from the investment and she invested in a mutual fund.
Because of this early sacrifice, she stopped investing in this fund after 11 years had passed. She had established her nest egg, and then she was able to do other things with the savings she was putting into the fund annually. She could have continued to save/invest it or to spend it. Her early sacrifice provided earlier financial choice/freedom.
Left for the long term, Lenda’s early savings turned in a wonderful nest egg 30 years later. An important lesson here is that you do not need a lot of money to generate wealth. Regular, early savings/investments are important. The value of the timing of the earlier savings is what creates the significant difference.
The answer is yes, it is possible for a working woman to be a financial heroine and enjoy the fruits of her achievements in her lifetime. If the investor keeps on investing rather than stopping after 11 years, the fund will accelerate in value even faster.
You will know you have reached your goal when you can afford to share your success with your family and community unstintingly. Your financial future is sure and secure. More secure than you would ever had thought in all your dreams.
Is not this worth the effort and sacrifice? If youth is not on your side, starting to save/invest is better late than never.
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