In the world of money, a good plan executed today is far better than a perfect plan executed in the future.
Let’s be real – investing your hard-earned money can be scary. You want to make the best choices to grow your wealth, but it’s tough to know where to begin. The problem is, waiting for the “perfect” time to start investing can actually end up costing you big time.
Here’s why: Time and compound interest are money superheroes when it comes to investing. By getting in the game early and letting your money work for you, even small amounts can snowball into something major down the road.
Opportunity cost refers to the potential gains that one misses out on when choosing not to take action.
In the context of investing, this cost is not just the money you won’t invest this year, but the compounded growth of that money over time.
For example, let’s consider a client who hesitated to invest $100 a week due to fear and uncertainty. She believed that missing a year’s worth of investments would cost her around $5,000. However, when we examined the long-term impact, the results were staggering.
Had she invested that $100 weekly until retirement at age 65, her investment could have grown to over $300,000. This illustrates how procrastination can lead to substantial financial losses over time.
Many people delay investing due to psychological barriers such as fear of making mistakes, being overwhelmed by market noise, or simply waiting for the “perfect” time.
These barriers often lead to procrastination and missed opportunities. It’s essential to recognise these mental hurdles and find ways to overcome them to ensure a healthier financial future.
The key to successful investing lies in starting early and being consistent.
Consider the example mentioned earlier: a consistent investment of $100 per week growing to over $300,000 by retirement.
This growth is driven by the power of compound interest, which Albert Einstein famously called the “eighth wonder of the world.” By starting early, you give your investments more time to grow and compound, leading to significantly higher returns in the long run.
One of the most effective ways to overcome procrastination and ensure consistent investing is to automate the process.
Set up automatic transfers to your investment accounts, so you don’t have to rely on willpower or remember to manually transfer funds.
This approach ensures that your investments continue to grow steadily over time.
When investing, it’s crucial to think long-term and not get discouraged by short-term market fluctuations.
Focus on the overall growth and progress of your investments over time. Additionally, make it a habit to celebrate your financial milestones. Recognizing and celebrating your progress can keep you motivated and committed to your investment strategy.
The real cost of inaction in investing is far greater than many realize. By delaying, you not only miss out on immediate investment opportunities but also the compounded growth that comes with time.
Overcoming psychological barriers and starting early can make a significant difference in your financial future.
Automate your investments, think long-term, celebrate your wins, and seek professional advice to ensure you stay on track.
Rather than waiting for some magical “right” moment, take that first step and begin your investment journey today. Your future self with a fatter bank account will thank you.
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Cheering you on!
Certified Financial Planner®, Director
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Important:
This is not tax advice. Your personal objectives, needs or financial situation have not been considered when preparing this information.
The information contained in this update has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs.
You should seek advice before making any decision regarding any information, strategies or products mentioned to consider whether that is appropriate to your own objectives, financial situation and needs.
Current as of 12th June 2024.