So it's always been hard to grasp how much money exactly would have to be put away so that I can live comfortably when I get older. Its always a scary thought when you look at your check every two weeks and it feels like its just enough to pay off your monthly expenses and all of a sudden we have to keep savings in mind.
A hundred dollars can buy a lot of things and it's so easy to think, "it's just a hundred bucks, I can afford it." But did you know if you resisted that temptation that I'm sure many face more than a few times a month, you could actually turn a measly hundred dollars into a small fortune?
Don't believe me? Do the math alongside me: www.suzeorman.com/2009actionplan/compinterest
Throw in $100 as your initial investment and add in $100 as your monthly addition and tag on an 8% return for 30 years.
What do you get? Kind of blows your mind right? It shows you that you would have deposited roughly $36,000 into the account out of your own pocket so where did the additional $115,000 come from???? The bank basically gave it to you through a nifty little word called interest.
Where did I get the 8% return when banks are only offering 1% right now? A small virtual network of people buying and selling shares of companies that evolved from the barter system called the stock market. Right now you're saying, "I don't know anything about stock! Forget this!" The answer is mutual funds! Mutual funds will allow you to invest in stock without having to have the downside risk of picking that 1 bad stock out of the millions of stocks out there. Mutual funds are run by fund managers who do exactly what their title claims, manage funds.
Each of these funds will describe exactly what they do. Because we are all young and we have the bulk of our earnings potential down here, we can afford to place our bets so to speak by being in more agressive stock funds which will give us a return of roughly 7-10%. "Where do I go to buy these mutual funds?" You can go to many different places such as the bank or a couple of bigger firms such as Fidelity or Charles Schwab which will let you hold accounts with them very inexpensively or ask your employer to take off an extra hundred dollars a month to throw into your 401k.
How hard is it to save a hundred bucks a month? Some of you probably have monthly gym memberships you pay $50 to $90 for that you don't even use! One less dinner a month, a pair of sneakers that you don't really need to buy. Not too hard right?
Commit yourself to this. Add this into your monthly budgeting, have an automatic text message sent to you to remind you to save as if it were a monthly bill of its own! You can do it!
Wanna see something that'll really blow your mind? See what happens if you add another 0 behind that 100 per month... 1000 every month compounded at 8%.
I'm thinking that I want to show you I can practice what I preach and I just might open a separate account that I can deposit money into and scan and post my monthly statements just so that you can keep me honest! If I have enough people ask me to do it, I just might!
"What the mind of man can conceive and believe, it can achieve." - Napoleon Hill
Wednesday, June 30, 2010
Why Am I Doing This?
Because I work in finance, I have a ton of people ask me, "What do I do?" and it brought me to thinking about how I am handling my own finances. In my research, I realized that I am lacking in many ways and I'm in finance!
Just like everything else in life, out of sight means out of mind. People don't start thinking about their finances until they're older because they feel their current situation does not allow for such "luxuries." Everyone's thoughts are, "I have a 401k and my employer handles that so I'll be okay when I get older." But all of a sudden, reality hits when somebody paints the grim picture and says how it SHOULD have been done and its already too late.
I'm creating this blog not just for everyone but for myself as well. Two things to remember, it is never too late or TOO EARLY (thx to my friend Cat for pointing that out) and there is no such thing as too small when it comes to saving!
"In order to succeed you must fail, so that you know what NOT to do next time." - Anthony J. D'Angelo
Just like everything else in life, out of sight means out of mind. People don't start thinking about their finances until they're older because they feel their current situation does not allow for such "luxuries." Everyone's thoughts are, "I have a 401k and my employer handles that so I'll be okay when I get older." But all of a sudden, reality hits when somebody paints the grim picture and says how it SHOULD have been done and its already too late.
I'm creating this blog not just for everyone but for myself as well. Two things to remember, it is never too late or TOO EARLY (thx to my friend Cat for pointing that out) and there is no such thing as too small when it comes to saving!
"In order to succeed you must fail, so that you know what NOT to do next time." - Anthony J. D'Angelo
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