Common Cents # 36

 

All of us need money to live in a modern society. There are several ways to make money. The most common way is to sell our time. “I have eight hours today to spare. You can have it for $15 an hour, $120.00.” To make more I need to work more hours or convince somebody that my time is worth more.

We can also sell our skill or perhaps a special ability that somebody else needs. For example, I might need to have my automobile repaired, or maybe I need to have a cavity in my tooth filled, or perhaps a surgical procedure completed. In that case, I am not paying someone for their time as much as I am for a specific skill. That person might make hundreds or even thousands of dollars an hour, except neither they nor us look at it that way. They are paid for their skill or knowledge. In this case they can increase their income by increasing their skills.

Both of those methods of making money require us to be there and do what is required of us. Eventually most of would like to do less or even do nothing and still have enough money to live well. In that case we need to own some things that will get up every day and go to work for us. We need to put our assets to work.

We call those types of things investments. If we don’t have any investments, we will need to work every day of our lives to earn money to live if we need more than Social Security will provide. It is that simple.

Beginning in the 1930’s the government began making some investments for us in this system called Social Security. Social Security is not an investment as much as it is “Old Age Insurance.” Many people have some sort of investments through their employer with a 401(k) or other pension plan. But the vast majority of us should be making investments of our own on a regular planned method in addition to any employer-sponsored accounts we qualify for.

The secret to financial peace and not having to worry about money is having your money in investments that do their share of the work. There is wonderful calculator on the internet that will tell you exactly how much you need to accumulate to have the kind of income you want, based on how long you think you might live, and the return you expect from your investments. It is: https://www.bankrate.com/calculators/investing/annuity-calculator.aspx. Plug in the numbers you know, or your best estimate, and the calculator will tell you the other number. For example, if you know how much money you have, how much money you need per month, and the rate of return that is expected, the calculator will tell you how long the money will last. This is a great tool to use to see how you are doing. Have fun!