Monday, September 24, 2007

Now Is The Time To Act

We are bombarded with financial advice and suggestions everyday. Websites, news channels, financial gurus and the pesky brother-in-law who considers himself the next Warren Buffet – all have something to offer. And mostly its good advice – how to save and how to investing.

The component which in my mind is not clearly emphasized is the value of timely action. An article in Yahoo Finance today articulated the cost of neglecting certain financials rules. Stuff like – paying for a checking account will cost you $25-$100/month, putting $5K idle money in a CD will earn you about $250/year etc. Good stuff but still missing the point.

Act now! The biggest lever we have in this financial tug-o-war is time. And once you have squandered that advantage – you are almost toast. Time is what is needed to help compounding work for you. Which means that small amounts invested over large period of time creates exponential wealth.

So the biggest mistake we can make today is not realizing where we are in this timeline and how important it is to stop, think, learn and decide to make appropriate investments that will yield the big numbers over time. If you are 35yrs old and do not know if your 401(K) investments are making 8% or 2% could be detrimental for your retirement health. If you are not contributing regularly to your 401(K) or to a post-tax investment account – you are missing out the 30-40 time horizon many of us have to guarantee a reasonable retirement.

Remember – all this advice about saving and investing needs to be aligned with the time factor. If you are fortunate to have a long time horizon – use it to your advantage. Starting now!

1 comment:

sid said...

That is right on. Time is the biggest ally in accumulating a reasonable amount of wealth to live comfortably in retirement.

For someone starting to invest or early in their career, getting your savings deducted out of your paycheck is the best way to ensure that you are saving diligently. It is hard to spend money you don't have (well not exactly with $50K credit card limits, but let's assume you know that the average credit card APR is 15% and the most favorable long-term return on your money is close to 10%).

So save your money from its worst enemy - YOU! Get it far away from yourself - workplace 401K plans, automatic deductions to your mortgage, monthly drafts to mutual fund accounts (money market funds are too easy to draw on and have lousy returns anyway).

Then, you can stop worrying and enjoy the rest guilt-free because you're ahead of the game when it comes to saving for your future.