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Compound Interest

personal economy May 29, 2020

You know how over “the holidays” all of those choices for sweets treats and drinks and parties… it all shows up on our bodies?! Tighter pants, waistlines that are expanding. Well, maybe some of you can relate. That’s why a new year’s resolution often has health goals listed at the top. It’s glaringly obvious what that compounding effect of extra calories appears as. 

Well, your bank account and retirement accounts can have that same plump experience! No matter your current age right NOW is the time to start saving, to max out your retirement accounts, and stop making excuses. Although, you will need to make changes. Just like dropping those holiday pounds requires a change of behaviors, the same goes for saving. You will have to give up a little something in order to gain a bigger something. 

I was recently reading The Millionaire Next Door and it isn’t high income that makes someone wealthy. I have seen plenty of high-earners not save a dime. It’s the savings that build wealth. And then the compound effect and that power that is seen from that. Money grows over time. So start… NOW.

Let me share with you something that punched me in the face and I just had to share. The younger you start the more time that money has to grow. Think of a little seedling. It doesn’t really matter how big or small that seedling is…. it has the ability to grow into something massive… but over time. Here’s an example. Let’s say you got a big tax refund, sold something at a profit or just came into having $5000 to invest. At an average rate of return of 8% annually, if you never touched that $5000 and that is all you invested into an IRA at the age of 20, that can become just under $180,000 at age 65!!!! Say what??? Now, let’s say you waited until 40 to invest that $5000. At the age of 65, this investment with the same 8% annual return has only grown to just under $40,000. Now, let’s say you matched that $5000 by contributing faithfully every year that $5000… if you started at 20 years old, you would have over $2,000,000- and sitting pretty, huh? 

So think about your car payment. If you drove a car that was paid for, maybe a little older and a little less… “sexy” then you could take that amount you would be paying towards a car and save it. If you invested what would be a car payment into a retirement vessel and let it grow, you could really have a retirement worth enjoying. Travel, spoiling your family, splurging on nice dinners or pampering yourself. Think of the social causes you could support and the impact you could bring to your community. Instead of how millions of Americans are living right now… on a “fixed income” of social security money and clipping coupons to make it through the money on a tiny dollar amount that doesn’t provide for a life you love. 

If your future self could reach through these words and talk to you right now, I hope you hear your ROAR saying START TODAY. Put aside what you can today. Make it hurt a little. Yeah, so you have to postpone a few wants and desires. So what. Make your coffee at home rather than a $5 drive-through run. Meal prep rather than take out. 

Stop saying you will do it someday. Someday becomes 20 years and a whole difference in a standard of living when you are done working. It’s easy to say, “When I make XX then I will start investing.” No you won’t. You will start when you believe: You are worth it. Invest in yourself. And start today. I bet if you really sat down and looked at where you could scrape $100 today, you could. And where you could shave another $50, it’s there. And before you know it, you have a few hundred a month going towards your best life, in savings, to grow. Once you have a little stockpile, now you can actually go and sit with a financial advisor without feeling embarrassed or judged, because you did it. You save enough to get started in retirement accounts and investments and now you are well on your way. 

Did you believe you could be a millionaire? Why not? Get rid of those thoughts standing in your way. And get excited about the possibility. You got this. You can do this. Start today. Ready? Me too. I am ready for you.


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