{"id":234,"date":"2017-01-30T09:45:27","date_gmt":"2017-01-30T15:45:27","guid":{"rendered":"https:\/\/www.brandonrenfro.com\/?p=234"},"modified":"2022-07-14T14:40:17","modified_gmt":"2022-07-14T14:40:17","slug":"now-or-later","status":"publish","type":"post","link":"https:\/\/belongingwealth.com\/now-or-later\/","title":{"rendered":"Now or Later? Planning for Long-Term Goals"},"content":{"rendered":"

Have you thought about what you might be giving up by waiting to invest for long-term goals such as retirement? One of the greatest financial tools that young investors have is time. Time\u2019s effect on long-term investment performance is much greater than financial savvy or a large income. So many younger would-be savers and investors put off starting because they don\u2019t think they know enough. The truth is though that doing just about anything is better than doing nothing at all.<\/strong><\/p>\n

A 25-year-old person that puts just $100 per month into a savings account will have $48,000 when they are 65. Not much to retire on, but even that may help finish off a mortgage so you won\u2019t have a monthly house payment.<\/p>\n

Small, incremental changes from that compound the benefits. Now say that you invest in a simple index fund and earn an average 7.1%<\/a> on that money. That $100 each month becomes $269,968 by the time you reach 65. Small change, big results.<\/p>\n

Maybe you are thinking, \u201cSaving $100 per month is easy. I should be able to save $200.\u201d Ok. That translates to $539,936.<\/p>\n

Simple enough, right? But what do most people in their 20\u2019s decide to do? Wait.<\/em><\/strong><\/p>\n

There isn\u2019t anything unnatural about waiting to save. Most people in this life stage want to finish school, get settled in a career, relationship, or location, buy a reliable car, and maybe have kids. These things require money either directly or through saving for contingencies. It is a little more difficult to put money aside when you feel like every dollar is needed now.<\/p>\n

Basic living expenses are an obvious necessity and student loan payments can\u2019t be ignored.<\/p>\n

But what is the effect of waiting?<\/h2>\n

If you save $100 per month starting when you are 35, you will have $36,000 instead of $48,000. That\u2019s $12,000 you won\u2019t have to pay off a mortgage or other take care of any big-ticket items before you retire.<\/p>\n

If you wait until you are 35 to earn that 7.1% average return from a simple index fund you will have $124,431 instead of $269,968. That is a $144,537 difference.<\/p>\n

Waiting to save $200 per month? That will give you $248,863 instead of the $539,936 you would have if you had started at 25. So, waiting those ten years will cost you $291, 072. That is enough to hurt.<\/p>\n

Remember, time is worth more than savvy<\/em>.<\/strong><\/h2>\n

So, what if you start saving $200 per month when you are 25 but only earn 5%? You would have $305,204\u2026 which is still $56, 341 more than you would have if you waited until you were 35 and earned 7.1%.<\/p>\n

Clearly, deciding now to start saving and investing is going to pay off. The longer you have to earn a return on your savings the greater the benefit is.<\/p>\n

So, how do implement a simple savings plan? Two of the most common ways for millennials to save money for the future are:<\/p>\n

    \n
  1. Open a savings account with your bank. These are simple to set up and most banks will allow you to automatically draft a certain amount out of your checking account each month.<\/li>\n<\/ol>\n

     <\/p>\n

      \n
    1. Start contributing to a Roth IRA<\/a>. The Roth IRA provides a good way for you to save money and earn returns without getting a tax bill. Again, these are easy to set up and will allow you to set up automatic monthly contributions.<\/li>\n<\/ol>\n

      There\u2019s always something competing for your efforts, attention, and money. You can\u2019t do it all, but starting an investment plan early<\/a> will pay off.<\/p>\n

      Do it. Do it badly <\/em>even. Just do it now.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Have you thought about what you might be giving up by waiting to invest for long-term goals such as retirement? One of the greatest financial tools that young investors have is time. Time\u2019s effect on long-term investment performance is much greater than financial savvy or a large income. So many younger would-be savers and investors […]<\/p>\n","protected":false},"author":4,"featured_media":226,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[12,8,13],"yoast_head":"\nNow or Later? 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