Time Value Of Money

The majority of people truly do not understand the time value of money or if they do they sure don't seem to appreciate it. It is a safe bet that most people who will read this don't understand what it will take to live 10, 15 or 20 years down the road.

Most people have seen an ad about how long and how much they will pay to the credit card. They just don't connect, that the power the credit card company has to make so much money is available to every single person who has just a small amount to set aside for themselves. Let us do a few calculations.

These numbers are for examples only. There are many factors and assumptions that go into these:

Say you make 5000 a month now and you are 35. You will want to retire some where around 65. A target number at best as most people either have to severely limit there lives, or continue some form of work. (I am here to inform you now nobody says when the teacher asks, "I want to be a Wal-Mart greeter when I grow up."). With that in mind:

5000 Dollars of today's money will take 16,216 Dollars in 30 years to give an equivalent lifestyle, when the average 35 year old today wishes to retire. This assumes inflation will continue to average 4% (This number is a joke as it is closer to 7%).

Suddenly you are thinking Social Security isn't going to do it for me is it. That's right if you want to keep up your lifestyle you need a plan. It doesn't have to be so aggressive you need to kill yourself, but it does have to meet the mark.

Time Value of Money is as follows. This is the one that kills me when I hear people putting off their investment planning.

So let's say you are in the work force and you just turned 18. If you put back a meager 100 dollars a month and get a modest 12 percent return for mere 8 years. I mean you never invest again after the age of 26. What will you have?

1 million 2 hundred thousand Dollars that is the amount you will have in the bank. That is correct 1.2 million dollars. So what if you wait until 26 to start:

Well you can put in 1200 a year or 100 a month until the day you turn 65 and you will only have 820,000 dollars.

If that doesn't drive the point home, I don't know how else to do it. You need to go see a Financial Advisor and get your numbers worked out and you need a plan. Putting it off for whatever little reason, whatever the justification, is costing you thousand of dollars a day.

So back to my original statement how do you get the power the Credit Card Company has?

Paying yourself first, that is how you get the power. Decide the number 50, 100, and 200 and so on, once you decide, you pay that before you pay anything else.

Skimp everywhere, the only way you are going to have something is to pay yourself first.

Eventually your investments will dwarf your credit balance. You just have to do it. If you don't you will have some paid off bills and not enough to your name to get you buried properly. Just the way the bankers like it. This way they can write a loan to your kids to put a headstone on your grave.