George Lopez says that when we asks his Latino friends if they want to do some activity with him, like play golf, they respond by saying - do you want to do it right now-right now or later-later? I ask you a similar question, should you invest right now-right now, or later-later? Let me help you if you have no idea on how to answer this question.
The reason to invest right now is based on the concept of compounding. Mark Twain once said that compounding is the 8th wonder of the world. What is compounding? Compounding is the concept of growing your money geometrically not arithmetically. Did I lose you already? Hang in there. Would you prefer to have a $100,000 dollars today or 1 dollar doubled every day for 20 days (one dollar today, two dollars tomorrow, four dollars the next day, etc.)? Does this sound like a trick question? One dollar doubled every day for just 20 days turns out to be over a million dollars. This is the power of compounding.
Compounding also tells us that the sooner we begin saving, the less money we will have to put away in the future. For example if you are 24 years old and invest $3,000 a year for only 10 years at an 8% interest rate by the time you are 65 years old you will have $550,897 (having invested $30,000). If you wait until you are 34, you will have to invest $3,000 a year for almost 35 years (having invested $105,000) just to have the same amount of money.
These examples should convince you that you need to start investing today. Don’t be like the typical old person who tells me, “I can’t believe I am 60 years old and I don’t have any money. I should have started when I was young. If I had only met you years ago…”
If I have convinced you to start investing - what is your first step? Start with your retirement plan at work. Have your company withhold at least 10% of your salary from your paycheck and have it directly deposited into your 401k plan. If you don’t have a pension plan at work, you could open up an Individual Retirement Arrangement (IRA) at a bank or online with a no-load investment company. You can have money withdrawn from your checking account and directly deposited into your IRA on a monthly basis. Another great way to get started is to invest in mutual funds. Seek professional advice before investing in anything you don't understand.
By the way, George Lopez, if you are reading this, I have sent you a couple copies of my book asking you for a testimonial. Can you send it to me right now-right now, not later-later?
The reason to invest right now is based on the concept of compounding. Mark Twain once said that compounding is the 8th wonder of the world. What is compounding? Compounding is the concept of growing your money geometrically not arithmetically. Did I lose you already? Hang in there. Would you prefer to have a $100,000 dollars today or 1 dollar doubled every day for 20 days (one dollar today, two dollars tomorrow, four dollars the next day, etc.)? Does this sound like a trick question? One dollar doubled every day for just 20 days turns out to be over a million dollars. This is the power of compounding.
Compounding also tells us that the sooner we begin saving, the less money we will have to put away in the future. For example if you are 24 years old and invest $3,000 a year for only 10 years at an 8% interest rate by the time you are 65 years old you will have $550,897 (having invested $30,000). If you wait until you are 34, you will have to invest $3,000 a year for almost 35 years (having invested $105,000) just to have the same amount of money.
These examples should convince you that you need to start investing today. Don’t be like the typical old person who tells me, “I can’t believe I am 60 years old and I don’t have any money. I should have started when I was young. If I had only met you years ago…”
If I have convinced you to start investing - what is your first step? Start with your retirement plan at work. Have your company withhold at least 10% of your salary from your paycheck and have it directly deposited into your 401k plan. If you don’t have a pension plan at work, you could open up an Individual Retirement Arrangement (IRA) at a bank or online with a no-load investment company. You can have money withdrawn from your checking account and directly deposited into your IRA on a monthly basis. Another great way to get started is to invest in mutual funds. Seek professional advice before investing in anything you don't understand.
By the way, George Lopez, if you are reading this, I have sent you a couple copies of my book asking you for a testimonial. Can you send it to me right now-right now, not later-later?
You are right-on Louis. The power of compounding and discipline saving/investing is something that people seldom understand but works wonders.
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