I will show you 2 important keys to building wealth. The first is to start early. When you are young and in your 20s and life is wide open with possibilities, the idea of retirement seems as remote as death itself. But it is this very remoteness that is the key. Time is the critical factor.
A 20 year old saving $200 a month until 65 and earning 8% per year would have over a million dollars at 65. The same person starting 20 years later would have only a liitle over $190,000. Just waiting 10 yesrs and you will have less than half as someone starting at 20.
So key number one is start saving early and let the magic of time and compound interest do its magic. If you’re older, don’t despair, just get started now and you will still have more than if you keep putting it off.
The 2nd key and the one which makes the first one work is PAY YOURSELF FIRST. The reason many have so little savings is they wait till the end of the month to save. After going out, a fee nice dinners, some new clothes, there is nothing left. Instead, the moment you receive your paycheck, set aside some for savings. Maybe your income is low and you can’t put aside $200 a month. Put aside what you can. Over time it will grow and more importantly you will have developed the habit of paying yourself first. Paying yourself first applies to any windfalls you might receive. You get a tax return of $500. You could go out and buy a new tv or you could sock that money away. The consequences of your decision will only be apparent over time. At 6% that $500 will grow to over $1600 in 20 years time, more than triple the original amount. If you saved your tax return yearly, the money really adds up. Combine that with your monthly savings and your little nest egg will grow into a small fortune.
So the two keys are 1)Start Now 2) Always pay yourself first. If you follow these 2 steps consistently, you will be surprised how fast your money grows.