I advise people on personal finance including banking, budgeting, saving, and investing. How to save your money-tricks, how to budget, and using credit cards, etc. How to make more money by investing? What are stocks? Bonds? Mutual funds? What can you do to start today and maximize returns?
All you need is three ingredients, income, discipline and time. Chances are, you already have two of them, income and time. All you need to do is add the third, discipline.
There’s a saying in economics “expenses rise to meet income”. This means money that’s easily available to you is certain to be spent. That’s why most people’s paychecks disappear before their next payday. They get used to having a certain amount to spend, and habitually run down their bank account.
Here’s how it works: Say you start with nothing, invest $500 (of your income) a month (a healthy discipline), and let your money ride (over time) in diversified investments. Long term, the stock market returns at least 10% annually. Assuming a 10% return, you’d have $102,000 after 10 years, $380,000 after 20 years, and $1.1 million in 30 years.
It REALLY pays to start now. Check this: if you save 100 bucks/month until you’re 30 (for only 10 years, then you never save money again), and your dumb friend starts later–saving 100 bucks/month from age 30 to 65 (that’s 35 years compared to your 10 years)–you will have way more money (over $100,000 more) than him at age 65. Start early and you will be rich.
Here’s the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out above.
It’s not easy. But it’s very, very simple.