• Harry N. Stout

165- How Using Time Wisely Can Make You Wealthier


What is the most precious thing in your life besides your family? For most people, it is their time. For those readers who are older we all know that life goes by quickly. That favorite pair of jeans goes from being new to 10 years old in a heartbeat. Time is a key to managing your money. You can use it to your benefit to make you wealthier.


If you make certain savings decisions at younger ages, you can accumulate much more for your later years. If you put off saving to the last minute you will lose the value that time can produce. When it comes to saving money, time is your friend when you are young and can be your enemy if you are older. You can’t get the years back. Certain financial things in life take time; you cannot overcome a lifetime of not saving with last-minute actions.


The Time Value of Money

Here is a quick example of the importance of taking advantage of time. Let’s say you want to start saving for the older years of your life. You have two options — begin saving $10,000 per year at age twenty-two or wait until age thirty-two to start the program. Let’s assume you can earn 7 percent on your money through a combination of stocks and bonds. Let’s see what this looks like.


Here is what you would accumulate if you started saving at age twenty-two at a 7-percent return:

Here is what you would accumulate if you started saving at age 32 or ten years later at a 7- percent return:

By starting ten years earlier, you would have accumulated $1,381,621 more. That is the difference between the amounts of $2,664,209 for age twenty-two and $1,282,588 for age thirty-two. The delay results in you having almost half as much in accumulated savings to fund the later years of your life. This simple example shows the impact of starting a disciplined savings approach early in your financial life and the power of compound interest income. You can make the calculations yourself comparing your current age to waiting another 5, 7 or 10 years to begin your savings program.


Summary

The pandemic has caused all of us to reconsider and possibly reset our money values and plans. People are saving more either because they can’t get out to spend money or because they have made a clear decision to have more cash on hand to deal with the uncertainties of life. As you can see from the above calculations, you should save as much as you can as early in your life as possible. Waiting until age 55 or 60 to start accumulating assets for your later years is not the best approach. Some people are forced to do this, but for the people who planned and put away cash when they were younger, they have far less anxiety and skepticism about being able to pay for their expected longer life expectancies.

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