A Lesson on Investing and the Time Value of Money

Your retirement is on sale…right now…and at a big discount.

This is true because, if you invest now, you will be in better shape than if you wait – much better!

Every dollar can grow. Sounds magical, but your money can grow, if you invest it. Plant your dollar in a patch, tend to it and it will produce a crop of interest, dividends and growth, called capital gains.

Something else magical happens: the crop of one year is added to the crop that grows in a following year. So, you not only get interest, dividends and capital gains on the initial dollar, but you also get interest, dividends and capital gains on the interest, dividends and capital gains. And this happens every year. It is called compounding.

The investment growth in any single year usually isn’t a big deal. But over time, like several decades, the impact is huge.

Consider saving for your retirement. Waiting to save for retirement will take much more. Here two quick examples:

  1. To have $50,000 in 40 years, you need to invest $7,102 at 5% today. Yes, just $7,102 in your patch will grow to be $50,000 in 40 years at 5%.
  2. But if you wait, and want to have the same $50,000 in 30 years, you need to invest $11,569 at 5%. That’s a big difference.

Waiting a decade means that you need to save over 60% more than if you start now.

Your retirement really is on sale now. So start saving!

In future posts, we will describe more on investing. Just as you have to water and weed your garden, you have to monitor and rebalance your investments. Also, just as picking what will grow well, producing the best harvest in your garden, while getting rid of plants that no longer grow as well, your investments need to right mix.


Steven A. Branson, Esq., is the founder of wokemoney.com, a website devoted to empowering people as their own money manager launching later this year.  For nearly 30 years, Branson has been creating financial plans for individuals and families of all ages, coaching them on a personalized path to achieve their financial goals.  Branson has a law degree from Harvard Law School and is known for his financial articles geared toward young people.  In his spare time, he is a musician, a graduate of Berklee College of Music who leads his own jazz band, playing tenor sax, and a photographer, who contributes to 500PX.  Branson’s writing and financial tips can be seen at our blog at www.millennials-money.com and IRIS.xyz.

 

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