Thursday, June 2, 2011

When the Future Looks Grim, Invest in the Future

With economic growth slowing, unemployment levels persistently high, earnings stagnant, the stock market falling, and the housing market falling harder, it's no wonder people think the future looks grim. That, however, offers no reason to turn away from the future. Investing in the future is crucial to success and prosperity later on. Take a page from Ford, the car company that didn't want a federal bailout. CNNMoney reports that Ford will build a 3-cylinder, 1.0 liter engine, with performance comparable to today's 4 cylinder, 1.6 liter engines, to be offered a couple of years from now. That's a major investment at a time when auto sales are slowing. But it makes sense to build a more fuel-efficient gasoline engine, since true national infrastructure for electric cars remains decades away.

People, too, can benefit from investing in the future. Here are some ways.

Higher Education. The earning ability of people with college degrees compared to those with just high school diplomas remains highly favorable to the better educated. Of course, there are exceptions, and for people who have the inclination and ability to go into a trade like plumbing or being an electrician, vocational training may be a better choice. But no education beyond high school is a bad idea. Lots of analysis is available today indicating that the earning potential between an internationally known Ivy League school and a less well-known state university may well not be worth the cost differential. Going to a less expensive state school, or two years of community college and then two years in a four-year college, may be financially more astute than taking on the mega debt required for an expensive private school. A lower profile school that offers a nice scholarship/grant package instead of the bigger name, bigger tuition Ivy or equivalent, may pave the way for you to accumulate a higher net worth by middle age. What doesn't make sense is not continuing with your education beyond high school. Continuing education may be a good idea throughout your life. Our advanced economy rewards those with current knowledge and specialized training.

Save More. As the returns on your investments start or continue to look shaky, the best response is to save more. Saving less may be tempting. Why save more only to lose the money when you could have a big blowout of a weekend instead? Because come Monday, you'll have a nasty hangover and the same problem of financing your retirement. Saving more strengthens the foundation for your retirement. Investment returns ebb and flow--after bad times come good times. If you don't persist in expanding your pool of savings, you'll get less in returns when the financial markets go positive.

Maintain What You Have. It's important to maintain your major property items, like cars and houses. Making big ticket items last can eventually save you a lot of money. Do the routine maintenance recommended by the manufacturer of your car (but not necessarily the maintenance recommended by dealers, which often involves a lot of unnecessary b.s. meant primarily to lighten your wallet). Maintain your house--change the filters on the HVAC and have the equipment cleaned regularly, repaint as needed, repair bad roofs and defective plumbing, do battle with the crab grass, and deal with potential homewreckers like mold, termites, etc. The expensive upgrade of the kitchen and bathrooms may look good, but won't do that much to enhance the value of the house. Not doing maintenance can detract from the value of the house and force you to sell below market when you move.

Remember, there will be a future. It may be good, or not so good. You'll either be part of the future, or face an alternative that's worse. If you're going to get the most out of the future, you should invest in it. Otherwise, you aren't likely to have much of a future.

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