There is a piece of simple financial advice that most people understand but choose to ignore.
The typical approach to managing money involves paying bills, buying the things that you want, and then saving whatever happens to be left over. The problem is, there is almost never anything left to save.
In order to be effective at saving and building your nest egg, you need to make it a priority. Most of us are good at finding excuses, and there’s always a reason why saving isn’t convenient. But if you pay yourself first and then create a budget around the amount that you want to save or invest, you’ll find that it’s possible to make progress even when things seem tight.
When I was in my mid 20’s I was living on my own and getting by, but I didn’t have a lot left over after paying bills and necessities. I had no savings and did not start an IRA as I should have. This put me way behind. I was living in New York City, spending an incredible amount of money on meals and drinks with friends, even though I did not have that money to spend.
Here are some numbers to show exactly how far behind I was by not saving early.
Published in 1994 by USAA, this study shows how much money you’ll accumulate over time if you invest $250 a month starting at different ages. It assumes an eight percent average annual investment return.
If you start at age:
25: You’ll accumulate $878,570 by age 65
35: You’ll accumulate $375,073 by age 65
45: You’ll accumulate $148,236 by age 65
If I had paid myself first, in terms of contributing to an IRA and built my budget around what was left, I would have been able to make it work. Even if I had saved $100 a month, that would have been $1200 a year that would have compounded for the past two decades.
As Albert Einstein once famously said, “compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” The snowball effect it creates isn’t exciting at first, but the avalanche it turns into is magnificent. Putting saved money into any vehicle that can compound has always been and will always be the simplest path to wealth.
Make saving your first priority, not your last. Put money away early and do not touch it. This is the simple secret to accumulating wealth.
And don’t forget to do some of that saving in Bitcoin!