Sacrifice Early, Reap Rewards Later with the Power of Compound Interest
The best thing you can do for yourself, financially speaking is to sacrifice early. Compound interest is a powerful thing! Make it work for you. Even investing as little as 10% from every single job you have in a broad market ETF will likely make you a millionaire by the time you retire. The key is starting early-even when you’re a teenager with a part-time job. Sacrifice early, reap rewards later-love it!
Waiting Until Later to Invest..Less than Ideal
On the other hand, if you wait to start investing for retirement until your 50’s or 60’s, you’ll be in big trouble. Time is most certainly working against you and there just isn’t enough years to make compound interest work for you. You also will not be able to ride out fluctuations in the stock market.
Picture this- you invest in the stock market when you’re 55, but plan to retire at 65. The markets go up for a while and you feel great with your decision! At the age of 63, there’s a huge crash, and you lose half the value of your portfolio. You need that money to spend in retirement, so you start withdrawing money when the value is down in the dumps. It’s not a great plan to say the least.
Start Early-Ride Out the Fluctuations
On the other hand, if you invest in the stock market in your 20’s, you have decades to ride out the ups and down. When you’re getting within a decade or so of retirement, begin a gradual process of selling stocks that have reached some nice highs. Or, just keep all your investments, and try to live off of dividend payments (the best plan). This is especially true if you’ve built up a nice portfolio of dividend paying stocks (what I personally do).
The stock market will eventually go up, given enough time. The key is to not be in it for the short-term. 10 years is the minimum amount of time I’d consider investing in the stock market for. Even better is buying a company that you can picture holding for the rest of your life.
Convinced? How to Sacrifice Early to Reap Rewards Later
If you’re convinced that waiting until “later” to start investing in the stock market is a pretty terrible idea, then I’ve done my job. But, how exactly do you find the money to invest in your teens, twenties and thirties? There are two ways, one is easier than the other:
- Increase your income. This often means going to school, increasing your qualifications somehow, or finding a similar, but better paying job. This is the less easy path. It’s not impossible, but it’ll take some time to do it.
- Decrease your expenses. This is the easier way to have money to invest even if your income isn’t high. The key is frugal living. The good news is that anyone can do it. And the other good thing is that you can start doing it today. Check out all our tips here: Frugal Living on Freedom Through Passive Income.
More Investing and Frugal Living Tips
It’s simple, no-nonsense personal finance advice for just about anybody. It covers things like avoiding, and paying off debt, finding and keeping a good job, insurance, student loans, frugal living, how to spend less on food, investing in the stock market, investments to avoid like the plague, and saving for retirement. Basically, everything you need to know to get your finances in order.
Get a copy for yourself. Give a copy to a high schooler, or university student in your life. It’ll make an excellent graduation or Christmas present. Check it out for yourself on Amazon: