Advertising

I Wish I Started To Save Earlier After Seeing This Chart

Advertising
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!

Advertising

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.

Advertising

screen-shot-2014-03-20-at-6.11.30-pm

    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.

    Advertising

    “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.

    Advertising

    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.

    Advertising

    • 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

    More by this author

    Lianne Martha Maiquez Laroya

    Lianne is a licensed financial advisor, Registered Financial Planner, entrepreneur and book author.

    How To Organize Your Day For Success The Ultimate Morning Routine for Success of Highly Successful People 11 Benefits of Fish Oil That You Might Not Know About 10 Key Elements of Effective Meetings to Avoid Wasting Time 9 Surprising Benefits Of Kimchi That Will Make You Want To Try It Now

    Trending in Money

    1 How To Achieve Financial Freedom With the Right Mindset 2 Financial Freedom is Not a Fantasy: 9 Secrets to Get You There 3 40 Healthy And Really Delicious Meals You Can Make Under $5 4 Life Insurance: A Secure Way To Protect Your Future. 5 How To Save Money On Groceries: 13 Quick Tips

    Read Next

    Advertising
    Advertising

    Published on November 8, 2021

    How To Achieve Financial Freedom With the Right Mindset

    Advertising
    How To Achieve Financial Freedom With the Right Mindset

    What would being financially free mean to you? Have you made the mistake of thinking that financial freedom requires millions of dollars and decades of hard work? When it comes to our relationship to money, the answers really lie in our mindset. Change your mindset around money and your entire financial outlook will change with it.

    And no: we’re not talking about putting a check for a million dollars under your pillow at night. This is about you becoming a financially free person, in whatever capacity you choose. And that’s really the key: it needs to be defined by you. So many people outsource this responsibility to society/celebrities/the government etc… and as a result never achieve it.

    What if you could identify what financial freedom looks like for you, realize that it is possible to get there in a matter of a few months and then build a road map to do just that?

    Read on, because that’s what we’re going to open you up to. This isn’t about giving you specific strategies “guaranteed to work in five minutes or your money back…blah blah.” This is about awakening you to just how powerful you are, where your blocks lie and how to smash through them effectively.

    Financial Freedom – What is it?

    Well like I said: I’m not going to define this for you. That misses the whole point of this article, but let’s lay out some ideas to get you started.

    Typically, when we talk about financial freedom in the west, we really mean: freedom from needing to work, in order to meet financial obligations. We know that there has been a rise in depression amongst nine-to-fivers, 62% as a matter of fact between 2019 and 2020 in the USA.[1] It’s therefore no wonder that there has been correlative uptick in the search for alternative solutions to finances.

    This depression is largely as a result of feeling trapped, unable to realize potential and being denied opportunity. It is also likely that, thanks to a more global world and social media: we see just how abundant life can be for some; like a carrot dangled tantalisingly close, but just out of reach. We yearn for more meaning in our lives, more excitement and to be able to live on our terms.

    Advertising

    Finances are (as we see it) the stumbling block and the preserve of the chosen few…not us.

    So to start building an accurate picture of what financial freedom would be for you, begin with what your life would look like if you didn’t have to worry about money. How would you feel if you didn’t have to consider your monthly budget, when putting your hand in your pocket to pay for lunch?

    The point is that a lot of the stress and resulting depression that comes from feeling like a ‘wage-slave’ is down to our lack of clarity on what we actually want. We get caught, focussing on what we lack and that perpetuates a mindset of lack that very quickly is reflected in our reality. We are allowing our subconscious, emotional mind to be bombarded with imagery every day that reenforces a sense that we aren’t good enough. That we do not have what it takes.

    That wouldn’t happen though if we had done the work of pinning down exactly what we wanted in the first place.

    Does Financial Freedom Come at Extreme Levels of Net Worth?

    There is a tendency, thanks again largely to how we are conditioned through media, to think that financial freedom only comes at extreme levels of net worth. What if I told you that is completely ill-founded and untrue?

    Using the standard/assumed definition of financial freedom for a moment; this means that you need enough capital to generate a return that is greater than, or equal to your monthly expenditure. That doesn’t necessarily tell the full picture, but nevertheless; it’s is a good place to start.

    If your monthly outgoings (mortgage, bills etc…) come to $3,000 for argument’s sake, you can achieve that with as little as $108,000 invested over three years.[2]

    Advertising

    Hardly the millions you had probably envisioned is it?

    Remember: we’re not talking about you living a lavish lifestyle necessarily. If that is what you want; fantastic, it’s certainly achievable, but what we’re getting at here is your ability to meet all of your financial obligations without having to work.

    I’m sure you’re unlikely to find $108,000 down the back of your couch, but it is a figure that is well within reach of most working adults. A $36,000 salary opens you up to borrowing that kind of money, and even if you have to continue working in the short term in order to service the debt and keep up with your bills; you’ll have a clear end goal in sight.

    And you’ll have doubled your income in the meantime, for the same amount of work!

    How To Achieve Financial Freedom With the Right Mindset

    As we touched on earlier, coming at your life from a space of ‘lack’ simply perpetuates more of the same. As I always say: your environment doesn’t lie. Look around you, if you’re dissatisfied with any aspect of your life, you first need to accept responsibility for it. If you don’t, you’re abdicating your power to make new choices.

    You may well have been the victim of circumstance in the past, but how you respond and what you do with that experience is up to you. If you choose to look for the positive, however minor it might be in any given situation – your experience of life will begin to change.

    This is, in essence, what The Law of Attraction is all about. What lies behind it is your reticular activating system (RAS). The part of your brain designed to filter out the (as it sees it) unless information, highlight the important information and prioritize your safety. Thanks to it being part of your primeval/‘lizard’ brain however, it predates the conscious mind, intellect and reason.

    Advertising

    The issue for a lot of us is that we haven’t understood how to communicate in a way that our RAS understands. We can’t translate our conscious desires and are therefore caught in a loop between two incongruous forces.

    Our subconscious wants us to be alive and it bases its criteria for this, largely on the principal of: same = safe. Meanwhile, your quality of life, passive income, work/life balance etc… are inconsequential. That part of your mind doesn’t give a hoot about the utility bill or being able to afford a holiday.

    It is perfectly possible to show you subconscious/RAS the benefits of financial freedom though, or indeed any other outcome you’d like to see in your life. You just have to speak its language. Becoming debt free and financially free is actually one of the easiest things you can communicate to your subconscious, because you have so much ‘real-world’ experience with money.

    Here’s how:

    1. Start by clearing your mind and being present – find a meditation, visualization or breathing exercise that calms your mind, allows you to focus on the present moment and become an observer of your surroundings. The point of this is to stop all of those thoughts buzzing around in your head that are pulling you back to the past, or projecting you into an imagined future.
    2. Then build a mental movie or slideshow of what your average day would look like, were you to achieve financial freedom. We’re not talking about big occasions, huge wins or events; just an average day.
    3. From your position of present observer – start to observe the feelings that arise as you go about this average day in your new life. Do you feel your shoulders relax and drop? Have you got excited ‘butterflies’ in your stomach? Are you smiling more?

    Learn to recall these feelings at will – this will connect the dots for your RAS and you will soon start noticing a shift. Think of it as connecting with your desired future and pulling it into/towards your present.

    Bonus Hack – Practice Gratitude

    We’ve already discussed how you can start attracting/observing the opportunities that will enable you to achieve financial freedom. This involves a lot of work in order to finesse, but the principals are easy enough to understand. Something that we can all do, no matter what we’re trying to achieve, is practice gratitude.

    Using the same principals that I’ve outlined above: something of a ‘catch-all’ that we can train our minds to produce more of, is gratitude. If we can shift our mindset so that the next time some negative, external and unforeseen event occurs, we are still able to be grateful for it; your entire experience will shift.

    Advertising

    Not only will you observe more to be grateful for all around you on a daily basis, but you will shift out of a mindset of ‘lack’. All of the barriers that stood in your way before (not enough capital, stuck in a job I hate etc…) they will shift to becoming things that support your desires and goals.

    For example:

    The job you hate, when reframed as the means to support a transitional stage of your life (i.e. enabling you to borrow money to invest) suddenly gives you a resource to be grateful for.

    The added beauty of this is that your RAS doesn’t know the difference between a big win and a small win. You being truly, deeply grateful for your socks (for example) carries the same weight as being grateful for your health, or your spouse. This is why I say “practice” gratitude. You can start whenever you want!

    Look around you right now and find something that you really are grateful for, no matter how small and seemingly inconsequential.

    Practicing this will create a snowball effect. Much quicker than you might think: you’ll be overwhelmed with gratitude for your life and all that’s in it.

    In Summary

    Financial freedom is more within your reach than you probably think or feel. Understand that the limits you’re assuming to be there are largely a product of your subconscious mind, having been drip-fed evidence of that over the course of your lifetime. Changing that might take a lot of effort in the short-term, like cranking over an old car, but the effects will begin to build up quickly and self-perpetuate.

    Advertising

    Apply this mindset to your financial situation and you will find that it too will begin to ‘snowball’. Financial freedom is closer than you think, so start looking for it today!

    Featured photo credit: Pepi Stojanovski via unsplash.com

    Reference

    Read Next