Comments on: The Cost of Waiting ONE Year! http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 21 Nov 2009 13:00:57 -0800 http://wordpress.org/?v=abc hourly 1 By: Business & Finance Blogs » Blog Archive » Playing with Numbers: Using Spreadsheets to Learn About Money http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-401712 Business & Finance Blogs » Blog Archive » Playing with Numbers: Using Spreadsheets to Learn About Money Sun, 08 Feb 2009 05:59:01 +0000 http://allthingsfinancialblog.com/?p=755#comment-401712 [...] This “cost of waiting” spreadsheet is based on one from by JLP at All Financial Matters. Remember, even if you’re old like me, it pays to start investing now instead of [...] [...] This “cost of waiting” spreadsheet is based on one from by JLP at All Financial Matters. Remember, even if you’re old like me, it pays to start investing now instead of [...]

]]> By: Playing with Numbers: Using Spreadsheets to Learn About Money ∞ Get Rich Slowly http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-400685 Playing with Numbers: Using Spreadsheets to Learn About Money ∞ Get Rich Slowly Tue, 03 Feb 2009 22:07:05 +0000 http://allthingsfinancialblog.com/?p=755#comment-400685 [...] interest. A spreadsheet makes it clear. Notes: This “cost of waiting” spreadsheet is based on one from by JLP at All Financial Matters. Remember, even if you’re old like me, it pays to start investing now instead of [...] [...] interest. A spreadsheet makes it clear. Notes: This “cost of waiting” spreadsheet is based on one from by JLP at All Financial Matters. Remember, even if you’re old like me, it pays to start investing now instead of [...]

]]> By: Me vs Debt http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-210081 Me vs Debt Sun, 13 Jan 2008 16:46:04 +0000 http://allthingsfinancialblog.com/?p=755#comment-210081 <strong>401(k) Contributions</strong> Right now my 401(k) contribution is at 5% of my gross income. After one year of employment (this May) I will be eligible for 100% match up to 5%. Free money! If you employer offers a match, you sho... 401(k) Contributions

Right now my 401(k) contribution is at 5% of my gross income. After one year of employment (this May) I will be eligible for 100% match up to 5%. Free money! If you employer offers a match, you sho…

]]> By: Paul http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-206476 Paul Wed, 09 Jan 2008 00:41:42 +0000 http://allthingsfinancialblog.com/?p=755#comment-206476 The amount that retirement-savings takes up of your salary is hugely important. Example... Age 23 (first year out of university earnings) 25k - 2k = 10% of earnings Age 30 (Mid point of career earnings) 50k - 4.3k = 8.6% of earnings One needs to look at the circumstances. We should always try to put money away for our long term future, and it is certain that the longer that money has to invest/appreciate then the less that needs to initial put in, but that is not the same as understanding somebody's entire income and debt portfolio and deciding what is the best structure for them. They may be on a low salary with high debt. It may be best to clear debt then consider the future. It may be best if their career is likely to see a major increase in salary (e.g. trainee lawyer to full paid lawyer) and that they are best structuring their savings to when they can most afford to pay more. The key is understanding that the longer it is left the more you must put in to get the same out as those who put less in earlier, but that does not mean that by waiting you are making a financial mistake - it really does depend on the best use of your resources at the time. The figures are pretty much unquestionable - 10k given 20 years to increase will be worth more than 10k given 15 years... that doesn't mean 10k is always the best financial route. The amount that retirement-savings takes up of your salary is hugely important.

Example…
Age 23 (first year out of university earnings) 25k – 2k = 10% of earnings
Age 30 (Mid point of career earnings) 50k – 4.3k = 8.6% of earnings

One needs to look at the circumstances. We should always try to put money away for our long term future, and it is certain that the longer that money has to invest/appreciate then the less that needs to initial put in, but that is not the same as understanding somebody’s entire income and debt portfolio and deciding what is the best structure for them.

They may be on a low salary with high debt. It may be best to clear debt then consider the future. It may be best if their career is likely to see a major increase in salary (e.g. trainee lawyer to full paid lawyer) and that they are best structuring their savings to when they can most afford to pay more.

The key is understanding that the longer it is left the more you must put in to get the same out as those who put less in earlier, but that does not mean that by waiting you are making a financial mistake – it really does depend on the best use of your resources at the time.

The figures are pretty much unquestionable – 10k given 20 years to increase will be worth more than 10k given 15 years… that doesn’t mean 10k is always the best financial route.

]]> By: hank http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-180253 hank Wed, 28 Nov 2007 06:28:38 +0000 http://allthingsfinancialblog.com/?p=755#comment-180253 Wow, a bit of animosity off a pretty decent post. Yea, we're using hypotheticals here, but it is just making the point of saving early as best you can, or else just win the lottery, that could work too - :) Nice post... Wow, a bit of animosity off a pretty decent post. Yea, we’re using hypotheticals here, but it is just making the point of saving early as best you can, or else just win the lottery, that could work too – :) Nice post…

]]> By: Billy http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-136198 Billy Mon, 03 Sep 2007 16:02:23 +0000 http://allthingsfinancialblog.com/?p=755#comment-136198 I dont think the post is specifically about Stocks Rob, that being said I do like your diversification strategy. Anyhow the message of saving and putting money into assets is an important one and one that all should be following. I dont think the post is specifically about Stocks Rob, that being said I do like your diversification strategy. Anyhow the message of saving and putting money into assets is an important one and one that all should be following.

]]> By: Rob http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-110977 Rob Wed, 06 Jun 2007 21:17:12 +0000 http://allthingsfinancialblog.com/?p=755#comment-110977 Investing in stocks is what I'm assuming this article is referring to. The stock market today is barely up from when GWBush took office 6.5 or so years ago. If you adjust for inflation it's none. So yes you may have stocks but are they REALLY worth more? What if you want to go to Europe and spend your money? When the Euro debuted it was at 1 to 1 with the dollar. It quickly fell to around $0.85 to buy 1 Euro. Now it's roughly $1.4 per Euro. Why is this? Piss poor fiscal/monetary policy and massive deficits. If you TRULY want to be wealthy and ACTUALLY diversified. Don't just invest in US held stocks & bonds. Divide your money 1/3 to Dollars (Dow Index for 75% and Bond Funds for the remainder), 1/3 to Euros (1/2 German Index, 1/2 French Index since they are relatively stable), 1/3 to Pounds Sterling (FTSE is a good bet IMO). This why you're not only investing, you're immunizing yourself against an Argentinian/Mexican/Asian money crisis which is sure to hit the US when our Dollar crashes do to our oblivious drive into ruining our future by the "we'll pay for it later" mentality of this current regime. Another opportunity is instead of investing in something passive that you don't control, you could always invest in your own company. I did and have no regrets :) Investing in stocks is what I’m assuming this article is referring to. The stock market today is barely up from when GWBush took office 6.5 or so years ago. If you adjust for inflation it’s none. So yes you may have stocks but are they REALLY worth more?

What if you want to go to Europe and spend your money? When the Euro debuted it was at 1 to 1 with the dollar. It quickly fell to around $0.85 to buy 1 Euro. Now it’s roughly $1.4 per Euro. Why is this? Piss poor fiscal/monetary policy and massive deficits.

If you TRULY want to be wealthy and ACTUALLY diversified. Don’t just invest in US held stocks & bonds. Divide your money 1/3 to Dollars (Dow Index for 75% and Bond Funds for the remainder), 1/3 to Euros (1/2 German Index, 1/2 French Index since they are relatively stable), 1/3 to Pounds Sterling (FTSE is a good bet IMO).

This why you’re not only investing, you’re immunizing yourself against an Argentinian/Mexican/Asian money crisis which is sure to hit the US when our Dollar crashes do to our oblivious drive into ruining our future by the “we’ll pay for it later” mentality of this current regime.

Another opportunity is instead of investing in something passive that you don’t control, you could always invest in your own company. I did and have no regrets :)

]]> By: JLP http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-110951 JLP Wed, 06 Jun 2007 19:06:20 +0000 http://allthingsfinancialblog.com/?p=755#comment-110951 Jim, Okay... Jim,

Okay…

]]> By: Jim http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-110944 Jim Wed, 06 Jun 2007 18:51:08 +0000 http://allthingsfinancialblog.com/?p=755#comment-110944 You forgot to factor in inflation, which is about 10 percent YoY for the OECD, based on money supply growth. Also, a 10% RoR is damn near impossible. The exception is short term growth in things like hedge funds. That is b/c we are in a financial bubble. Once that pops, things will revert to mean (or worse in the SR). In the long run, growth of 5.5% ( the return on U.S. T-Bills) is the standard RoR for these sorts of projections. The analysis is flawed, and overstates these benefits. That said, I still agree with the basic message. Start saving early. Keep your wealth in hard assets as well as assets that yield return. You forgot to factor in inflation, which is about 10 percent YoY for the OECD, based on money supply growth. Also, a 10% RoR is damn near impossible. The exception is short term growth in things like hedge funds. That is b/c we are in a financial bubble. Once that pops, things will revert to mean (or worse in the SR). In the long run, growth of 5.5% ( the return on U.S. T-Bills) is the standard RoR for these sorts of projections.

The analysis is flawed, and overstates these benefits. That said, I still agree with the basic message. Start saving early. Keep your wealth in hard assets as well as assets that yield return.

]]> By: Get Rich Slowly » How Compound Interest Favors the Young http://allfinancialmatters.com/2006/05/22/the-cost-of-waiting-one-year/comment-page-1/#comment-5305 Get Rich Slowly » How Compound Interest Favors the Young Tue, 23 May 2006 21:55:03 +0000 http://allthingsfinancialblog.com/?p=755#comment-5305 [...] A commenter at AllFinancialMatters writes: Don’t ever try to convince yourself that you can make up for not saving for a few years by saving later. It will snowball. You’ll establish a lifestyle that depends on too much of your income to ever make up for lost time. But if you didn’t save enough last year, resolve to find the extra money somewhere this year to make up for the lost time. When you are in your 40s like me and looking back, you won’t have regrets about your retirement savings. [...] [...] A commenter at AllFinancialMatters writes: Don’t ever try to convince yourself that you can make up for not saving for a few years by saving later. It will snowball. You’ll establish a lifestyle that depends on too much of your income to ever make up for lost time. But if you didn’t save enough last year, resolve to find the extra money somewhere this year to make up for the lost time. When you are in your 40s like me and looking back, you won’t have regrets about your retirement savings. [...]

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