Time Is a Young Firefighters Most Important Financial Tool
"Compound Interest is the 8th wonder of the world. Those that understand it earn it, those that don't pay it."
—Someone Smart (maybe Alfred Einstein)
Time is the most precious commodity you have. Are you wasting yours?
If you are letting the busyness of life keep you from investing, you are squandering the value time creates for your money.
So why is time so valuable when it comes to your money?
One dollar today is not worth one dollar tomorrow. That is the idea behind the time value of money.
Inflation erodes the future value of money while earning compound interest increases it. The earlier you begin investing, the longer compound interest has to work its magic.
Future value is the value of a current asset at a future date based on an assumed rate of growth.
So, why does this matter?
A delay in investing keeps you working because you HAVE to not because you WANT to.
Building wealth gives you freedom. Freedom means you have options. Without a sizeable nest egg, you'll remain on the hamster wheel of work just to maintain your lifestyle.
How many times have you read a headline about saving money that made you think, "I need to get started."
You know you need to start. And you have for a long time. But, then you think about the car note or the roof you need, or the baseball bat junior wants.
And you say, "eh, I've got time."
The longer you let that mistake linger, the longer you will be stuck working because you HAVE to.
So what's the difference between have to and want to?
Well, let's find out.
Let's imagine you began investing 15% of your $100,000 household income at age 30. At age 50, you decided you wanted to slow down and quit working so much. You had to take a pay cut, so you stopped investing, but you still earned enough to sustain your lifestyle without touching your savings.
Now, let's imagine that alternate reality you, at age 30, decided, "eh, I've got time." At age 35, you then began investing and invested 15% of your $100,000 household income until the day you retired at age 55.
Both of these versions of you ended up investing the same amount of money—$300,000.
Who do you think fared better?
And that difference of 5 years turns into the gap between have to and want to.
You might say, "Well, $800,000 is still a lot of money." And you'd be right. But, remember, this money has to sustain your lifestyle for the next 40 years, pay for your healthcare, buy gifts for grandbabies, fund any inheritance you'd like to leave, and cover your final expenses.
An extra $500,00 would go a long way towards covering your expected expenses plus the unexpected ones—which are to be expected—along the way.
So, please, I implore you; don't delay saving for your future.
Time can be your greatest ally or your worst enemy when it comes to investing. Don't let too much sand slip through the hourglass before you decide to take responsibility for your financial future.
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