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I Wish I Started To Save Earlier After Seeing This Chart

I Wish I Started To Save Earlier After Seeing This Chart

Why do you need to save earlier?

Each one of you must have had different thoughts after reading the title of this article. Also, each of you must be at a different stage of life; some are old, some are in their middle age and some are quite young. Saving is one aspect of our finances that is really important for each one of us, no matter what our stage of life is. The stage of life when we start saving, however, is absolutely important!

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The earlier you start, the better it is. It is as simple as that. Time is such a great helper that if you start saving early then your money can even exceed those who save a lot more than you, but start later in life. This is all possible because of one major phenomenon that is called compounding! Compound interest can do wonders for your money.

Let’s look at a hypothetical example, person A and person B. Both invest the same amount of money but for a different tenure. But A started saving at a very young age. Thus her money had a very long time to multiply and exceeded that of B. A quick look at this chart from JP Morgan Asset Management would explain things better.

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    Now after a quick scan of this chart, I am sure you would be interested in knowing what compound interest is and what you should do with your own savings to get the most out of them.

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    “Compound interest is the eighth wonder of the world” ~ Albert Einstein

    What it simply means is that you receive interest not only on your original investments, but also on any interest, dividends, and capital gains that accumulate so your money can grow faster and faster as the years roll on. Of course, the sooner you start saving and investing, the more time they will have to grow.

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    A very good example has been given by Robert T. Thompson regarding starting saving early. He says, “The simple truth is that the compounding of earnings in a retirement account creates the potential for an exponential increase in your retirement savings. And to harness the power of compounding to its full extent requires savings discipline, which is no different than exercise: It’s always better to do a little bit on a regular basis, rather than to postpone, hoping that a longer, more intense workout later on will get you back into shape.”

    If you aren’t 25 right now, you might be regretting the lost time after reading this but don’t lose heart. No matter what your age is, the key to financial success is to act NOW rather than to delay things.  If you haven’t thought in this direction previously, you can remedy that situation by following our suggestions. Here, we have compiled some ways for you to make the most out of your savings.

    • Start investing today. Now that you know what a powerful tool time is, you should not waste even a single day. Each day counts!
    • Always put your money in an investment channel that offers the benefit of compounding. No matter how good the rater of return is, compound interest will always outweigh the benefits yielded by simple interest.
    • Try to look for those investments where the frequency of compounding is more. For example, opt for those investments where compounding is done quarterly rather than half yearly or yearly. The more the frequency of compounding is, the more your money will grow!
    • Save the maximum portion of your earnings. If you start early, you might be well within your targets by saving only a small percentage of your income. However, the later you start, the more you should be saving.
    • Set a savings target and stick to it. Although goals don’t harm anyone at all, but the need to stick to your targets increases with age. If you start saving money later in life, you need to practice a lot of discipline with regard to your savings and financial goals. Tracking your income, savings and targets might be a good option for you.

    The value of time and compounding cannot be stressed enough. So start saving today and be well on your way of becoming a millionaire by the age you retire!!

    Featured photo credit: 401(K) 2012 by 401kcalculator.org via flickr.com

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    Last Updated on April 3, 2019

    How to Nix Your Credit Card Debt in Less Than 3 Years

    How to Nix Your Credit Card Debt in Less Than 3 Years

    Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

    By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

    This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

    Hint: there are ways that are easier than you think.

    1. Consider Consolidating Multiple Credit Cards If Possible

    This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

    It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

    Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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    Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

    My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

    Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

    2. Try to Pay the Full Balance You Spent Each Month at the Very Least

    You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

    Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

    If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

    3. Pay Extra When You Can – Every Small Amount Counts

    This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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    It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

    4. Create a Plan on How to Pay Extra

    Back to the main point, having this plan is giving you one less thing to think about.

    This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

    For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

    Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

    5. Cut out Costs for Services You Do Not Use

    If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

    In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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    6. Get Aggressive About It

    Consider these points:

    Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

    Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

    Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

    Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

    7. Reevaluate Your Progress at Set Intervals

    Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

    By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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    Finally (and most importantly)…

    8. Keep Trying

    Do not get discouraged. Pushing it off will make it worse. Just keep trying.

    Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

    Start Knocking out Your Debt Today

    The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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    Featured photo credit: Pexels via pexels.com

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