As I already said many times before (and I’m pretty sure I will repeat it again), one of my biggest financial regrets is not starting to invest earlier in my life. I’m still young (or at least I feel like), but it hurts thinking about how much closer I’d be to financial independence if I did things differently in the past. That’s why I feel sad when I see people making the same mistakes.
Story of a Lazy Friend
A few months ago a friend of mine asked me which platform I use for investing. I was both happy and surprised by his question as I know he’s doesn’t have a financial mindset and never really invested in the past.
I have sent him an invitation to the platform I use (in which case we both get EUR 100-100 trading fee deduction) and also offered that if he would like, we can have a chat about investment options based on his time-frame and risk tolerance.
It already took him some weeks to fill out the forms and submit it to the company. Then it turned out that he made some mistakes and his application was rejected.
“Too much hassle” – he said. “Anyway, I’ll rather wait for a few months as I need to buy some things for the house”.
I didn’t really want to push him as he’s quite a stubborn type, so I left it up to him. But this story made me further think about how much money can we lose by postponing such decisions. It’s common knowledge that during long term investing time is our ally. But how much does some delay mean on a long term?
How One Year Becomes Five
Take my favorite example: let’s invest EUR 10k per year which returns 7% annually. After 25 years the value of our investment is EUR 632,490. Now let’s see we start the exact same investing method a year later. The results are shown in the below table.
In the first year we’re already short EUR 10,700 (the investment of the missed year plus its returns). And the gap is getting bigger and bigger year by year. By year 25 the difference is over 50k. That’s not one, but more than five years worth of investing. 20% of the total investing time.
It’s quite clear for me that wasted time can be compounded just like your investments (or your debt). This is why it’s crucial to start investing as early as possible.
Obviously in the beginning of your career you don’t have a lot to invest but it doesn’t matter. The key is the regularity and the saving rate.
- Saving is the Best Kick-Starter of Wealth
- Achieving Financial Independence is Not About the Amount of Saving But the Saving Rate
Do yourself a favor and don’t hesitate. If you haven’t done already, start investing now and don’t just think about it. Your future self will be grateful.
If you don’t know where to start, here are some useful posts to read:
- How to be a Millionaire?
- Investment Principles in Practice
- Dividend Investing Basics
- Bond Basics
- Searching for the Perfect Portfolio
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Disclaimer: This post or any other information on the site is not intended to be and does not constitute financial advice or any other advice. I am solely sharing my idea, plan and progress on early retirement.