You’ve heard it all your life — “Go to college,” they said. Making an investment in your future, according to society, has always including seeking higher education of some kind or another, which certainly makes sense when you think about the specialized knowledge and training it takes to earn a high income. Maybe you have just inherited some money or received cash for a structured settlement and are ready to invest. But knowing all the facts when it comes to your financial future never hurt anyone, and sometimes what seems like a smart investment in your future can be a shortcut to snowballing debt. Here are some common goals to strive for and the hard facts about the financial booby traps hidden along the way:
- Buying a Home
- Starting a Business
If successful, a business could be the most lucrative way of making an investment for yourself — and could also be the source of the most painful personal and financial losses. According to the Kauffman Foundation, the estimated average cost of starting a business is around $30, 000. Aspiring business owners are some of the most innovative, creative and motivated people out there, and some ways they have found to finance their new businesses include, but are not limited to: getting a bank loan, using a credit card, crowdfunding, borrowing on their 401k, pledging future earnings, or finding investors. All of these methods, if your business was to flounder, would make getting out of debt very hard. By all means pursue your dreams, but make sure to be aware of the challenges and manage your finances.
Gaining access and knowledge to a particular field, building lifelong friendships, vital connections, and learning important skills are just some of the upsides of going to traditional four year college. This form of personal investment could take years to pay off after graduation as you establish yourself in your field, gain experience, and find footholds advance your professional standing. But beware — according to the College Board the average cost of tuition and fees at a private university is $31, 000 a year, and around $10, 000 at public institutions. Life doesn’t stop for your loans after college, so in the average American household, adults owe $11,244 in student payments along with auto loans and mortgage payments. Pursuing a higher education is an excellent way to invest in your money, but with America’s collective outstanding student loans reaching $1.3 trillion this year, make sure to have a plan for ways to reduce your debt and manage your monthly expenses before you start to see returns.
They used to say that real estate was the safest investment an individual could make — but then the 2008 housing crisis happened. It is no longer a secret that taking out loans on a home could be the financial decision that buries the entire family in debt. Adults in the average American household owe $70, 000 on their mortgages and by 2010 the average cost of a new home was $272, 900. Overcoming financial challenges to buy a home can often feel like a victory, but making an investment in a home is all about being aware of the danger of defaulting and choosing the right time in your life to buy.