DISCLAIMER - I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice. These are my findings and can hopefully help you make informed decisions on investing. Consult a Broker or Lawyer before making any investment.
WHEN TO START INVESTING?
Nothing is greater than having a loving family. We need to take steps to provide for our family, and that includes investing. What is the best age to begin? Many start in their 60’s, some in their 50s. Fewer in their 40s, even less in their 30s, and almost none in their 20s. The younger you are the less we seem to think about retirement.
You think retirement is WAAAYYYYYY out there. Reality is it is on you before you can blink. The sooner you get started, the easier it is to accumulate a large amount of money. As a young person, it is hard to make the mature decisions that will give you excellent long-term results.
I want to tell you a little about my own personal life and how I viewed investments starting in my 20’s. I was no different than most people in my young years. Having the cool car and motorcycle was way more important than worrying about saving money and investing. It made little difference at all to me. I preferred striving for the fastest drag racing car in those years. Riding dirt bikes was way more important in my 20s and 30s than investments.
Being a Christian, God dealt with me about my lack of service to him, and in my early 20s, I gave up the dragstrip and started serving God on Sundays. Soon I got married and after a few years, we purchased our first home. At the tender age of 27, my first son was born. Investments weren't on my mind at this point. To me, I had my whole life in front of me.
In my 30s, I finished up my college studies and began some investment study. I opened my first brokerage account at Merrill Lynch and was blessed with a great broker. The problem was he could not change my spending habits. Even after I started my consulting business and began making a lot of money, I could spend $1,000 more than I made, sometimes even in a month. The more I made, the more I spent. I blew a lot of money and didn’t save any for retirement.
We had more children and decided to move to the country and buy land and build a large 4-bedroom home. With over 50 acres of land, we built 4 wheeler and motorcycle trails and bought more and more toys. The older the kids got, the more expensive the toys became. We also worked a lot in those days and built barns and raised cattle and horses.
It was a lot of fun, but as before, we continued to spend more than we made. By the time I bought all the horse trailers and other ranch equipment, I was now spending as much as $20,000 more per year than I was making. This was accomplished by having too much credit limit on several credit cards. We traveled in those years and spent over $5,000 yearly on vacations. Someday I would easily pay it all back I thought as I made more and more money each year.
When I got into my 40’s, I saw that things were out of control and sought help with Consumer Credit Counelling. With their help, I would have made it out of the bondage, but some business situations went south and I wound up having to declare bankruptcy and start over.
It was in my 50s when this bankruptcy happened, and in a way, it was a blessing. I sold the big home and did a restart on my finances. With help from Dave Ramsey and his book Total Money Makeover, I finally saw the danger of debt. We got out of debt totally in 2021 and I got serious about investing. We started multiple IRAs, but by waiting so late to begin, I lost the edge in compounding.
The Compound Effect by Darren Hardy explains how compounding is a great blessing in life and especially so in investments.
My issue was a lack of self-discipline. Read my articles on Resilience and Determination which are attributes we need to acquire.
Article on Resilience
Article on Determination
My lack of understanding about Compounding really hurt me. In my college years, I did study the Rule of 72 in accounting at college.
The Rule of 72
In summary, the rule of 72 shows you how long it will take to double your original investment based on a specific rate of return. You take the interest rate and divide it into 72 to determine the number of years it will take to double your money.
Interest Rate No. Years Calculation
6% 12 72/6
10% 7.2 72/10
12% 6 72/12
20% 3.5 72/20
In reverse, the rule of 72 can tell you what interest rate (return) it will require for the number of years to get it doubled. Divide the years into 72 to get it. If you want to double in 4 years, it will take 18%. (72/4)
So, a practical example of this would be if you could make a consistent return of 12% every year, your money would double every 6 years. Think of the number of times that would happen if you started at age of 23 versus 59.
If you started at age 23, you would double your investment 7 times before 65.
65-23 = 42 42/6 = 7
But at age 59, it would only double one time until you are 65. HUGE HUGE difference.
The sooner you start, the sooner you can acquire a huge sum in your retirement account.
Show discipline in your life and start now. If you are young, take my word for it. You really need to start now. Don’t wait until you are in your 50s as I did and miss all the simple compounding of investments.
The simplest and most direct way is to start investing now in a Roth Ira.
Differences in Traditional and Roth IRAs
By investing in a Roth IRA, all of your Interest, dividends, and capital gains are never taxed. You don’t get a break on your initial contribution as you do on Traditional IRA, but there are no taxes on withdrawals and no forced RMDs. (Required Minimum Distributions.)
If you already have a traditional IRA, it is ok to use it. But you will have to pay taxes on your distributions. One option is to convert it to a ROTH IRA and pay the taxes now. Each situation needs to be evaluated. An accountant or tax planner can give you good advice.
But the answer to the question of “When To Start Investing” is TODAY.
If young, get started now. If old, get started. But the sooner you begin the sooner you will start having success. Study and read about investing every day.
Read books by Robert Kiyosaki and Joshua King. (Kindle books) We have many articles in our Investment’s tab. Read all of our investment articles and pick a good strategy to invest and consistently fund your IRA while you can. You must have Earned Income to make contributions.
List of All Investment Articles
List of all Minimalism Articles
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