Some areas for thought:
- Be sure you are putting at least the company matched amount in your 401k… matching = free money;
- Goal of saving by paying yourself first- target at least 5-10% of gross income (or more), and work to increase every year for – and we can review monthly- measure Net Worth (what gets measured gets improved.. seems like a catchy phrase);
- Match your children’s earned income with deposits in a Roth IRA- take advantage of the knowledge and wisdom you have today about time-growth of money for your children… they may not appreciate it until they are in their 40s, but in due time you will be giving them a great gift;
- Estate & Inheritance Planning: gifting today to increase your contributions to heirs’ tax advantaged accounts can make a big difference, and you may not be able to add later (requires earned income);
Example of the power of time has over total amount invested
example below show how person-1 invest $10,000/year for 10 years and stops has more money than person-2 who waits 10 years, then invest $10,000/year for the next 40 years. Person-2 can never catch the wealth of person-1, even though they invest $400,000 (vs the $100,00 invested by person-1)
| Invest first 10 Years |
Invest every year after first 10 years | 10 year value/ to initial invested | 20 year value/ total invested | 30 year value/ total invested | 40 year value/ total invested |
50 year value/ total invested | |||||||
| (9% avg. return) |
(9% avg. return) |
(9% avg. return) |
(9% avg. return) |
(9% avg. return) | |||||||||
| $10,000/year | $0/year | $165,603/ $100,000 |
$392,042/ $100,000 |
$928,107/ $100,000 |
$2,197,166/ $100,000 |
$5,669,626/ $100,000 | |||||||
| $0/year | $10,000/year | $0 / $0 |
$165,603/ $100,000 |
$557,645/ $200,000 |
$1,485,752/ $300,000 |
$3,682,919/ $400,000 |
It amazes me that our basic education system does a poor job teaching Personal Finance and Investing.
Strugglers’ key traits:
borrow money and pay interest
interest = money your paying for nothing
buy items that go down in value
spending a high percentage of income/wealth on cars, adult toys, trips, etc. -vs- investments
live all for today, while not allocating a portion of their monies for future
failing to allocate a portion of income to investments, to start building a Nest-Egg
get eaten by inflation..
if your do not invest any savings in stocks, then inflation will erode your savings buying power
do not take advantage of tax deferred investments
Prosperous key traits:
wait to purchase items when they will pay for the items without borrowing monies.
an exception for buying items like a house, that can help you build wealth.
allocate small/limited percent of purchases to cars, adult toys, vacation… items that lose most/all of their value
allocate funds to their Nest-Egg, making a golden goose to provide for them forever (and their heirs)
average Inflation since 1913 is 3.3%. That means prices double every 21 years (you lose 50% of your purchasing power)
if your investments are not beating inflation, your buying power will drop significantly