Investing Early Matters

Growing up I can’t recall having much positive role models around me in my life. In fact, until my mid 20’s not one single example of a successful role model. Most of my peers and family around me were all living the grind trying to make ends meet.

I often thought to myself how awesome it would be if someone taught me the benefits and importance of investing early in my teens. The simple fact that investing early with a small amount of money each month can result to massive wealth in the future.

Unfortunately, it wasn’t the case for me. Luckily, I came across information early in my life that helped me realize the importance of compounding.

Here is a chart that shows how much you must invest each month to become a millionaire by the retirement age of 66. The figures assume a 7% annualized return compounded for monthly investments.

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For those of you who are 18 years old, a monthly payment of $212.05 will make you a millionaire by retirement. The crazy part is the total principal you invest over that period of time only comes to $122,139.55 while your total return results to a whopping $877,860.45!

 

Are you contemplating on leasing or financing a car with payments around that range? Think about that correlation between $212.05 and the million dollars. A choice between a car that drops in value like a rock or secure the million dollars at a low cost of $212.05.

Perhaps it would be wise to prioritize and secure the million. Then, once you have enough cash flow above those funds for the million, you can consider the car?

I had the opportunity to internalize this math in my early 20’s which eliminated my desire to purchase new cars. Importance of financial security far outweighed depreciating cars.

If I began to save at my current age of 38, I would have to save $962.75 each month to get to a million dollars. It’s doable for many but the point is, how awesome would it be if you had begun early and in result have the luxury to contribute an easy $212.05 to hit the same targets in the later ages.

It’s amazing how money compounds over a long stretch of time. The difficult part for many is to leave the money alone to do its job.

I love hearing about parents who fund their children’s college fund the moment their baby is born. A $10,000 investment with a return of 7% over the course of 18 years will result to $33,800! It’s like paying for college upfront but with a massive discount! I love stuff like this. It’s a matter of perspective.

Invest early! Time is valuable when it comes to wealth building.

Thanks for reading.