In the classic film and book Gone with the Wind the protagonist Scarlett O’Hara is a bit of a procrastinator. She takes comfort in believing that “tomorrow” she will handle things, saying “tomorrow I’ll think of some way… after all, tomorrow is another day.”
Unfortunately too many folks take that same procrastinator attitude when it comes to managing their finances. Folks fail to realize that the time to start saving for retirement, investing, or building savings habits etc. was yesterday; but if you did not start yesterday don’t be like Scarlett and put it off till tomorrow. Start today.
One barrier I see time and again is this myth that to start investing a person should have a large idle sum of money laying around. Then that person waits until they get this large sum of idle money that never arrives. For most people the best way to invest/save is to do it incrementally over time. Budget out a small portion that can be saved each month and have it automatically contributed to the savings or investment account. Then periodically evaluate and increase that contribution amount.
Below is an excerpt from an article I was reading the other day that ties into the above text.
If you think getting a late start saving for retirement of just six years is no biggie, think again. A 26-year-old who makes $40,000 a year, gets 2% annual raises, saves 15% of yearly pay and earns 6% annually on his savings would accumulate a nest egg of just under $1.2 million by age 65. If that person waits six years until age 32 to get started, his nest egg would total roughly $855,000. That’s $345,000, or almost 30%, less for missing just those initial six years. If our fictional 26-year-old holds off 10 years until age 36, the nest egg shrinks to $685,000, some $515,000, or nearly 45%, less than with the early start. As Gilbert says in the commercial, “This gap between when we should start saving and when we do is one of the reasons why too many of us aren’t prepared for retirement.” Walter Updegrave – Money.com
Now for some very grim numbers that a friend sent me in an email, he said this was pulled from a John Mauldin newsletter. I have seen slightly different numbers depending on the sources, but wherever they come from they always seem to paint a grim picture.
The average savings of a 50-year-old is only $42,000. The average net worth of somebody between 55 and 64 is $46,000. A couple at age 65 can expect to pay $218,000 just for medical treatment over the next 20 years. Eighty percent of people between 30 and 54 believe they will not have enough money to retire. One in three people have no money saved for retirement at age 65, and almost 40% are 100% dependent on Social Security.
Written May 2nd, 2016