What Are The Most Important Personal Finance Facts To Know?
Imagine you started investing in your twenties. You managed to save $5,000 a year and put it into stocks and index funds, earning an average annual net return of 8%.
You stopped investing altogether in your thirties, but you kept the investments you had made up to that point.
Here's an alternative scenario. Since you're already young, you shouldn't save and invest $5,000 a year in your twenties.
You want to enjoy yourself while you can do responsible things later. So,
you start investing at age thirty, each year with the same amount. However, you don't stop after ten years because you started too late. Instead, you put $5,000 into investments every year until you reach age sixty-five.
The unexpected part: The person who invested twenty to thirty dollars and then stopped investing had more money. $1,156,619 to be exact.
The late-maturing person only made $930,510 despite their diligent efforts.
That's a gorgeous house with a $226,000 loss. Or a Lamborghini. Or a major surgery.
Or, who knows, the cost of living for the next five years after retirement?
Here's the most important personal financial information: You already know you'll lose this game tomorrow if you don't start today. Anonymous says, "Compound interest is the eighth wonder of the world."