Many of us are born procrastinators. We love to put things off until the last possible minute. When that moment arrives, we go into manic mode in a desperate, final scramble as our backs are up against the deadline. This usually involves locking ourselves in a room away from the rest of humanity and a steady supply of coffee (or other caffeinated beverage) so we can forego our normal sleep patterns as we pound out the final details of our project.
If you are like me, you don’t like it when you procrastinate and you vow each time to NEVER let this happen again. Or you may try to fake yourself into believing that it doesn’t matter – like it is positive character trait – by saying “I work really well under pressure.” If I am honest with myself, I hate the tension and frustration that comes when I put myself in that predicament. It highlights my lack of discipline. It reminds me of all the time I wasted. It makes me realize the truth of the saying, “Don’t put off until tomorrow what you can do today.”
There is no hard and fast deadline when it comes to our personal finances. This project is very open ended as it lasts your entire lifetime. So procrastinators rejoice – you can delay dealing with your financial problems for years. But if you do, it will cost you greatly.
Let’s look at several examples related to retirement investing. According to the IRS guidelines, the contribution limit for a Roth IRA in 2012 is $5,000 per year for someone 50 years of age and under who qualifies for this type of retirement account. So lets suppose you make a one-time investment of $5,000 into a Roth IRA at age 30. If that investment grows at a conservative average of 8% per year until age 70, you will have amassed $108,622. If, however, you put off making that initial investment for just five years, the total by age 70 is reduced to $73,926.
Now lets assume again that you start at age 30 with a $5,000 initial investment but this time you continue to invest $5,000 per year until age 70. Assuming the same 8% average rate of return per year, your investments over that 40-year time span will have ballooned to a whopping $1,403,905. However, if you start just five years later, with the same figures and time frame, your investment will only reach $935,510. That is almost a half-million dollar difference!
You may not have $5,000 a year to invest. Maybe you only can afford $150 a month. So you may think, “What’s the point of investing this little? There is no chance that will make me wealthy.” Well, lets look at one more example. If an individual begins to invest $150 per month at age 20 and those investments grow at an average of 8% per year until age 70, they will have built up a hefty $1,189,759. I think I could retire on that, don’t you?
The variable in both these examples is of course time. Time is by far the biggest component to building great wealth. The more time you have, the more prosperous you can become. Every day you put off dealing with your finances is another day you have wasted in this pursuit.
Start early – even with a little. Set some short, medium and long-range financial goals. Remain consistent and disciplined in your approach.
Don’t wait until next year to start or it will cost you.
Proverbs 24:34 – “Through wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches.”
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