The Most Important Step to Retire Early

Retire EarlyA few months ago I was asked a very interesting question by one of my financial freedom students.  She asked “If you could only give me one single piece of advice, what would it be?”

I sat there quietly pondering my response for what was likely several minutes as she looked on waiting.  In my mind I was considering the path that I’ve taken towards financial freedom.  I took time to contemplate the challenges, consider the obstacles and reflect upon the successes along the way.

Alas I broke the silence with my response, “Invest now“.

“That’s it?” she blurted out, “that’s the best advice you can give me?”

“Yes!”, I proclaimed, “People delay investing for numerous reasons – fear of failure, trying to time the market, feeling like they don’t know enough, prioritizing instant gratification over saving – the list goes on and on.”

I then continued to explain “The exercise of investing now, right at this very moment, will eliminate virtually all of these reasons.  Fear of failure will subside, there’s no more worrying about timing the market, the fear of the unknown will be replaced with curiosity and the desire to learn.  Over time as your investments grow you will learn to curb your desire for instant gratification so that you can retire decades earlier – achieving a level of gratification that is immeasurable.”

“Wow. But… I… “, she stammered.   I cut her off “Excuses!  It’s our default reaction when fear takes over”.  To which she rebutted “No, it’s not an excuse.  I just don’t have any money to invest right now.”

The next few hours we spend going over her finances, taking a look at her typical expenditures and we strategized a gameplan.  We found three key areas where she could easily save hundreds of dollars every month – clothes, coffee and eating out.  In fact, until we performed this exercise she had no idea those expenditures were costing her more than $15,000 each and every year!

She committed to the plan of action and has already been on track for several months.  Not only is her expenditures way down, she is happier, more confident and her stress level has decreased significantly.

In our most recent conversation she exclaimed “I don’t even notice the extra money missing!  Just getting started and investing was much easier than I thought it would be.  I don’t even know what I was ever afraid of!”  I laughed and replied “I told you getting started was the most important advice I could give you.  Isn’t it nice to know that the money you’ve saved is working each and every day for you, enabling you to retire early?”  She smiled and acknowledged teasingly “No comment.  Okay, okay… yes.  It is.  Now shut up!”

What is the cost of delaying investment?  Let’s take a peek:

Begin Investing $200 / Month at Age:

Age

20 25 30 35

40

20 $2,400.00
21 $5,208.00
22 $8,254.68
23 $11,560.33
24 $15,146.96
25 $19,038.45 $2,400.00
26 $23,260.71 $5,208.00
27 $27,841.88 $8,254.68
28 $32,812.44 $11,560.33
29 $38,205.49 $15,146.96
30 $44,056.96 $19,038.45 $2,400.00
31 $50,405.80 $23,260.71 $5,208.00
32 $57,294.29 $27,841.88 $8,254.68
33 $64,768.31 $32,812.44 $11,560.33
34 $72,877.61 $38,205.49 $15,146.96
35 $81,676.21 $44,056.96 $19,038.45 $2,400.00
36 $91,222.69 $50,405.80 $23,260.71 $5,208.00
37 $101,580.62 $57,294.29 $27,841.88 $8,254.68
38 $112,818.97 $64,768.31 $32,812.44 $11,560.33
39 $125,012.58 $72,877.61 $38,205.49 $15,146.96
40 $138,242.65 $81,676.21 $44,056.96 $19,038.45 $2,400.00
41 $152,597.28 $91,222.69 $50,405.80 $23,260.71 $5,208.00
42 $168,172.05 $101,580.62 $57,294.29 $27,841.88 $8,254.68
43 $185,070.67 $112,818.97 $64,768.31 $32,812.44 $11,560.33
44 $203,405.68 $125,012.58 $72,877.61 $38,205.49 $15,146.96
45 $223,299.16 $138,242.65 $81,676.21 $44,056.96 $19,038.45
46 $244,883.59 $152,597.28 $91,222.69 $50,405.80 $23,260.71
47 $268,302.69 $168,172.05 $101,580.62 $57,294.29 $27,841.88
48 $293,712.42 $185,070.67 $112,818.97 $64,768.31 $32,812.44
49 $321,281.98 $203,405.68 $125,012.58 $72,877.61 $38,205.49
50 $351,194.95 $223,299.16 $138,242.65 $81,676.21 $44,056.96
51 $383,650.52 $244,883.59 $152,597.28 $91,222.69 $50,405.80
52 $418,864.81 $268,302.69 $168,172.05 $101,580.62 $57,294.29
53 $457,072.32 $293,712.42 $185,070.67 $112,818.97 $64,768.31
54 $498,527.47 $321,281.98 $203,405.68 $125,012.58 $72,877.61
55 $543,506.30 $351,194.95 $223,299.16 $138,242.65 $81,676.21
56 $592,308.34 $383,650.52 $244,883.59 $152,597.28 $91,222.69
57 $645,258.55 $418,864.81 $268,302.69 $168,172.05 $101,580.62
58 $702,709.53 $457,072.32 $293,712.42 $185,070.67 $112,818.97
59 $765,043.84 $498,527.47 $321,281.98 $203,405.68 $125,012.58
60 $832,676.56 $543,506.30 $351,194.95 $223,299.16 $138,242.65
61 $906,058.07 $592,308.34 $383,650.52 $244,883.59 $152,597.28
62 $985,677.01 $645,258.55 $418,864.81 $268,302.69 $168,172.05
63 $1,072,063.55 $702,709.53 $457,072.32 $293,712.42 $185,070.67
64 $1,165,792.95 $765,043.84 $498,527.47 $321,281.98 $203,405.68
65 $1,267,489.35 $832,676.56 $543,506.30 $351,194.95 $223,299.16

An individual who starts investing at age 20 will have a nest egg of $434,812.79 more than someone who starts only 5 years later at the age of 25.

Even more shocking, an individual who starts at age 20 will have a nest egg of $723,983.05 more than someone who starts 10 years later at age 30.  Keep in mind that the individual who started investing at age 20 only invested an additional $24,000 of his / her own money!

Once you understand the power of compounding, it’s almost impossible to ignore the importance of starting to invest immediately.

So what are you waiting for? Invest now.

Brent Mondoux
Founding Partner, Amplified Investments
brent@amplifiedinvestments.com

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2 comments on “The Most Important Step to Retire Early

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