Investing in the stock market is something everyone should consider whether you want to build wealth, retire one day or become financially independent. It allows you the opportunity to grow your money, but like most people, procrastination and avoidance can steer you away from getting started with investing.
Maybe you have debt or need to support additional family members. Maybe it always seems like you have unexpected expenses to pay for that eat into your budget each month. All these things can prevent you from wanting to invest but the biggest factor is motivation. If you lack motivation, you simply won’t put forth the effort or money to invest.
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Scary Investing Statistics
These five scary facts should help provide you with the motivation and urgency to start investing today.
1. More Americans Own Cats than Stocks
According to a Bankrate study, 52 percent of Americans report not owning any stock-based investments. CNN Money went so far as to state the fact that more Americans own cats than stocks. Why is this? And why should you feel a little uneasy about these findings?
About 50 percent of the people who said they don’t invest in stocks claimed they didn’t have the money to do so, while another 21 percent said they didn’t know about stocks and 7 percent said investing in stocks was too risky.
Coming out of a troubled economy can be the reason why many Americans can’t seem to find money to invest each month. But it’s important to realize how little you can start investing with.
While some brokers require higher initial deposits, Betterment allows you to start with no minimum balance. That’s right, you can start with as little as you want.
When it comes to not knowing how to invest wisely, Betterment is a great tool to use to simplify the entire process because it manages your investments for you. With Betterment, you specify your goals and budget, and it automatically invests your funds in Exchange-Traded Funds (ETFs) as opposed to trading stocks so you can avoid trading fees.
With online brokers out there that have low fees, low minimum deposit requirements and simplified systems and tools to utilize for beginners, there’s no reason why everyone shouldn’t be investing at least something. There are many other online brokers to consider; check out John’s list of best online brokerages for other possible options.
2. Social Security Keeps 1/3 of Older Americans Out of Poverty
In 2011, nearly 55 million people received some form of social security benefit and the previous year, social security kept around 35 percent of elderly Americans out of poverty.
Social security is currently a guarantee of income for many who have reached retirement age. But if you are depending on the benefits to fund your retirement, you might want to rethink your strategy. I personally don’t think social security benefits will disappear completely when the next generation reaches retirement age, but I do believe they will dwindle quite a bit.
According to the Pew Research Center, the federal program has been spending more money than it’s taken in since 2010. The negative cash flow in 2014 was $74 billion and according to the trustee’s intermediate forecast, there are only sufficient funds to be paid out until the year 2035.
In June 2011, the average social security benefit was $1,180.80 per month with the maximum being $2,366. In order to obtain the maximum monthly benefit, employees would need to earn the maximum taxable amount of $106,800 each year consistently starting at the age of 22 – not realistic.
In short, if social security even exists when you reach retirement age, you won’t be able to count on it to meet your basic needs. If you don’t want to work on the side until you’re 80+, you should be investing in a 401(k), Roth IRA, SEP IRA or any other tax-advantaged retirement account so your contributions can compound over time and provide you with dividends that you can use to meet your expenses when it’s time to retire.
3. 35% of Americans Can’t Afford to Retire
Speaking of retirement, one-third of American workers who are 55 years old and up can’t afford to retire according to a USA Today report. Of that 35 percent, almost half of survey participants (about 40 percent) admitted they have an investable net worth of less than $50,000.
I doubt all of these people were bad with money throughout their lifetimes. But with social security benefits dwindling, even the most diligent and hardworking Americans don’t stand a chance at retirement age if they don’t start investing earlier and more often. Creating a diversified portfolio can help you retire with a suitable financial cushion.
4. Investing When You’re in Debt May be More Profitable
Having debt is one of the main barriers that prevents people from investing. I’m all about paying off debt and making debt freedom a priority. But I also believe it’s important to invest as early as possible if financial freedom is your ultimate goal.
While you can pay off debt anytime, you can’t get your time back in terms of allowing your investment contributions to compound long-term. While investing at the same time you’re paying down debt may cost you some extra money in interest owed on your debt, it may not be more than what you stand to gain by investing early.
Paying off debt or investing first is a tough call to make depending on your situation. I believe high-interest debt like credit card debt and installment loans should be taken care of ASAP. But, if you have low-interest tax-deductible debt like student loans or a mortgage, you may want to see how it can benefit your finances to start investing as you pay your debt off. You can always begin by making small contributions and increase them over time.
5. Over 70% of Americans Don’t Like Their Jobs
According to Gallup’s State of the American Workplace Report, which surveyed 150,000 full and part-time workers, an overwhelming 70 percent revealed they weren’t happy with their jobs.
Despite receiving all the typical perks of working a traditional job, I was interested to see that many employees were not engaged or happy at work. If you find yourself in a similar situation, you can always look for another job, or even start your own business or side hustle so you can do work you feel more passionate about.
As an overarching goal, you also can set out to retire early if you want to become financially independent sooner so you won’t have to feel obligated to work. If you’d like to reach financial independence and retire early, it is possible.
There are many ways to approach this goal, but it all boils down to lowering your expenses and saving at least half or more of your income and then investing it for your living expenses during retirement. Once you calculate your necessary retirement portfolio amount and factor in a safe withdrawal rate prediction of 4 percent, you’ll know how much money to save.
Bottom Line
If any of these facts made you feel uneasy or resonated with you, the solution is simple. Start investing now and invest often.
What has held you back from investing in the stock market in the past? What is your strategy or goal that helps you stay motivated to invest? Are you in the ‘pay off debt first’ or ‘invest while paying off debt’ camp?
Choncé is a Certified Financial Education Instructor (CFEI), personal finance freelance writer, and blogger who focuses on helping others manage their money better in order to live a life with more possibilities and fewer limitations. Her work has been featured on Business Insider, LendingTree, Credit Sesame, and Barclaycard.
Geez, these statistics are scary. I also read that almost half of Americans don’t have $400 to cover an emergency. That is definitely scary, but it also explains why we have high debt levels.
I read about that one too. It’s scary how many people don’t save and invest but I bet they don’t realize how simple it is and that you don’t have to have a ton of money to get started.
Most of these stats don’t surprise me, unfortunately. As a whole, we still haven’t yet prioritized our happiness over material possessions, and so many of us still ignore our future selves for the sake of temporary happiness in the near term. More people own cats than stocks?
Phew!
Very well said! I still struggle a bit with balancing living for now and preparing for the future. Tomorrow is not promised but if and when it does come, I’d like to be well prepared and happy.
These are all not shocking yet so disappointing. I think if you start young and do something you love, you will set yourself up for financial success later. That’s been my experience at least.
Very simple but practical advice. I think the problem is that some people feel the best time to make mistakes and not really know what you want is when you’re young and I partially agree with that. But with investing and saving, you can do it safely and start as young as you wish even if you don’t really know what you want out of life yet and I like that.
There is definitely a lot to think about here. Folks need get their priorities set.
I think it also comes down to financial education. I saw my great grandma collect steady SSI checks for several years and that income along with her pension seemed to be able to support her each month throughout retirement. If I assumed I would get a pension and plenty of social security each month when I retire that would be due to a lack of financial education because the stats are out there, people just need to see them and be willing to learn more about how to properly manage their money.
I think I understand how compounding in investing work with dividend stock because you’re reinvesting the dividend but I still don’t understand how compounding work with index fund. If I bought a share of a low cost s&p 500 index fund at age 30 and kept it for 35 years, wouldn’t I still only have one share valued at whatever the market is? so where does compounding interest come in? Thanks for the clarification.
Hi Terry, my short answer is that the market goes up each year (on average) so you will have much more after 30 years. These articles do a great job of breaking down the whole process for you.
https://investorjunkie.com/37907/compound-interest-investments/
http://www.primermagazine.com/2009/invest/millionaire-by-60-the-compounding-power-of-index-funds
Hmmm I wonder if the cat question people answered in terms of individual stock investing? I could see someone who invests in their 401k or other retirement account but not individual stocks “think” they don’t invest in “stocks” when they really do basically by default.
I was wondering the same thing as DC about the cats and stocks. I have invested for about 15 years (and I have 2 cats!). Thankfully my husband convinced me to start in our early 20s, and though we didn’t invest much for several years, compound interest is magical!
I want to say it was in regards to individual stocks but again, I think people may not know the difference or fully understand the various different ways to invest.
I’ll be honest, I was in the boat of people who never even considered investing for a long time. But over the past couple years I’ve put a lot more focus on saving and investing and I’m glad I did. I own stocks, but no cats!
That’s good to hear that you finally came around and started investing. Your future self will thank you!
That first stat about the cats made me laugh out loud – hah. Unfortunately, it doesn’t surprise me. I’m the opposite. No cats, all stocks 🙂
That’s great! I recently became a cat lady, so I’m hoping to have both 🙂
As someone that just left my W2 job to be a landlord, I can 100% agree with the thought process to start investing.
Work gets in the way of a lot of things. And work is not really fun. If it was fun, they would call it fun…
Finding the will and motivation to invest definitely starts with your mindset. I’m hoping this post helps a lot of the skeptics change their mindset and consider investing more.
Well Chonce, you’ve given me something to think about in regards to investing while in debt. I don’t have credit card debt and the interest on my car note and student loan debt is relatively low. I need to do a little research and see where I can begin making small contributions in an investment account. Because hating a job and wanting financial freedom is totally me!
Yeah I’m in the same boat. Just student loan debt for me but my husband has student loans too and a car loan w/ a low interest rate so we’re trying to invest where we can while still prioritizing debt. I have a short tolerance for certain jobs so I can definitely see myself just being so over it in my 40s and by that time, I want to be able to retire.
Even though we’re about $70k in debt between vehicles and student loans – we still invest about 18% of our income into our Roth 401k. It may not be a lot, but it’s the best balance we’ve found to still pay off a decent amount of debt and plan for retirement in our 20s.
I agree that people should still try to invest a little something while in debt repayment because there will be times when your investments will beat the market and your debt interest rates.
Great article!
That’s great that you do that. My husband has a 401(k) match through his employer and I have a Roth IRA. Even though we don’t max out our accounts yet due to still being in debt, we still try to put something away.