When I entered the industry I sat down with my boss and asked him... "If you could pick just one, what is the most important factor in planning and investing?" He sat back, and digested my question. He replied in a riddle, most often his favorite method of making me think.... "The most important thing about investing is this, it's something you can't create or buy or find and you have more of it than I do. It's time."
So, why do so many people not realize the preciousness of resource until later? Well to start, there are some factors in today's environment that are making investing early difficult.
Companies are cutting costs. The true "pension plan" is suddenly becoming a thing of the past. While a lot of companies do still offer traditional retirement plans, employees don't always take advantage of them. If your company doesn't offer a retirement plan, don't feel lost. There are still options available to you to save for retirement. In this scenario, it's important to seek advice, and be your own biggest advocate.
Our graduates are swamped in debt. It's no surprise to you that our graduating classes turn around to pay hundreds of dollars a month in student loans and are expected to also meet all of the new costs of living on a starting salary. Enter the beauty of the opportunity of moving back in with mom and dad to save a little!
Why does time matter so much you might ask? Briefly, one reason is that there's a basic mathematical concept in investing called "The Rule of 72." The rule of 72 states that if 72 is divided by an interest rate, it will provide you the approximate number of years needed to double your investment. So, for example if you use an assumed rate of return of 5% it would take 14.4 years to double your investment. If you get your first career job at 20 and don't start contributing to a retirement plan until you're 40 th at's already over one "doubling" you've missed out on.
If someone wanted to start today, to take advantage of the resource of time where do they start? The beauty is, that some companies offer minimums that are very low, such as $50/month. That's less than $2/day. So as you go to buy your afternoon coffee today, just think of instead where that $2 could potentially be in 40 years from now.
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The views depicted in this material are for information purposes only and should not be considered specific advice or recommendations for any individual. Examples provided are hypothetical in nature and are not meant to portray any specific investment. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.