Monday, March 13, 2017
(3/13/2017 09:00:00 AM) - Al
Tony Robbins uses a hypothetical example to illustrate the mathematics. There are two friends who are the same age, Joe and Bob. Joe begins investing $300 in the stock market every month from age 19 to 27, saving a total of $28,000. Bob does the same, but from age 27 to 65, for a total of $140,000. The stock market in this example grows 10% annually, a number chosen for its simplicity. By age 65, Joe has $1,863,287 and Bob has $1,589,733.
Those numbers are goofy, because no one 19-27 has $300 a month to invest unless you're a stripper or a drug dealer. The point is, however, is that if you start investing young...and perhaps more importantly, just leave it there, it's almost impossible to fail. Most young people not only do not invest, they pile up high interest debt, a double whammy they spend decades trying to dig out of.
As I have discussed here, I invested 10% of all my net earnings from the time I left for college into a mutual fund (I also invested in my 401k if one was offered). Often, I would just "round up" because I lived a simple lifestyle and rarely had a girlfriend (pause to allow you the shock to subside)...if I had made $1200 in a month, I might write a check for $200 and mail it with a form (this can all be done automatically these days, back then, auto withdrawal was rare and all but unheard of).
This worked great until I met the Rambling wife, who had to do an unpaid internship to get her degree in health info tech, and one of them had to be done 2.5 hours from home, making a commute impossible. It was mighty tough paying for 2 households for 4 months, as I think I was making $6.90 an hour at the time. We avoided it for a year or two, but finally, the weight of debt got so heavy I cashed it in (about $12K) and suddenly, we had a fresh start, which for the most part we have enjoyed since.
Of course, if you can't do 10%, start with 2% or 5%. Anything is better than nothing.
3/13/2017 09:00:00 AM