It never ceases to amaze us how many of our clients say “I thought I had more time” during our initial consultations with them. And frankly, it’s heartbreaking. While we always work hard to put our clients on the right path, there’s simply no substitution for getting started earlier on in life.
The “I Can Wait” Mentality
It all comes back to the “I can wait” mentality that we as a culture have. The truth of the matter is that we think we have an infinite amount of time.
More time to work. More time to save. More time to invest in the futures of our loved ones.
Until you don’t. Days turn into weeks; weeks turn into months; and before you know it, you’re nearing retirement age and you never took that dream vacation with your family. You also didn’t put aside what you needed to actually stop working one day and now “one day” seems further than you want.
There are serious disadvantages to waiting—and far too often they come at the cost of your financial freedom, enjoyment and even health.
4 Drawbacks of Waiting to Invest
We understand that there are a myriad of reasons why people may wait to invest. Some may feel that they never had the knowledge or resources available to make smart financial decisions. Others—and this is the most common reason we hear with clients—simply feel that they didn’t have enough money to actually invest in the first place. Whatever the reason, if you can tuck money away to start investing then you can set yourself to avoid:
Inability to Retire and Enjoy Life
No Reserves for Emergencies
Limited Assets to Leave for Your Family
Playing “Catch Up” Which Causes Unnecessary Stress for Yourself and Your Family
The Benefit of Investing Early in Life
On the other side of the spectrum, investing early in life may allow you to contribute less while still yielding more money.
For example, say George started contributing to an IRA at the age of 25. For the next 15 years he invested $1,000 a year. Similarly, Sally began investing $1,000 to her IRA but started 5 years after George—and for 5 years longer in total. Both earned roughly 5% per year on their investments.
Who would have a greater amount for retirement: George with his 15 years of contributions or Sally with her 20 years?
The answer is George.
Thanks to compounded interest, George was able to see more money at retirement with a smaller contribution total—all because he got started EARLIER. According to Earnest.com, the beauty of compound interest is that “Even if you never invested another penny, by starting earlier you’d still come out ahead of someone who chose to begin investing later in life. In other words, it pays to invest early and often. The longer your money can benefit from the power of compound interest, the bigger your gains will be as time goes on.” The scenario described is hypothetical and is provided to illustrate the potential benefits of financial planning. It is not intended to reflect the actual performance of any security
In fact, even Ben Franklin knew this could be a good way to save more money over time. Upon his death, Franklin left 1,000 pounds (roughly $4,500) to the two cities he loved the most, Boston and Philadelphia, but with stipulations. Over the span of 200 years, the cities were to loan out the money to hard-working and deserving young men while also investing it. The two cities followed the orders and at the end of the 200 years had amassed upwards of $6.5 million combined.
All because of the power of compound interest and $9,000.
Other advantages of investing early in life include:
It’s okay to make mistakes early on because you have more time to potentially bounce back.
Along the same lines, it gives you the flexibility to take risks that sometimes yield BIG results (and sometimes don’t, see previous)
It may make you a savvier spender. In other words, you could be smarter with your money all around, not just in investments.
Want a great tool? Check out this Savings Calculator courtesy of MSN (https://www.msn.com/en-us/money/tools/savingscalculator) to see how much your investments can yield with time on your side. These calculators are hypothetical examples used for illustrative purposes and do not represent the performance of any specific investment or product. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk of loss. Actual results will vary.
Now may be the time to help your money make more money. Don’t wait until you’re nearing retirement or in need of money to begin building and securing your financial future. Contact us at https://snowgroupllc.com/ to discuss your options for getting started today for a more confident tomorrow.