22 // OWNER OPERATOR // AUGUST 2013
Personal Finance
By Matt Alden S ., publisher of Dividend Monk , courtesy of artofmanliness . com
3 Lame Excuses for not Saving Money
It ’ s common knowledge that if you want to be wealthy , you have to save and invest . But looking at statistics , it seems this knowledge is becoming less and less common . The United States recently recorded a negative savings rate for the fi rst time since the Great Depression . We live in one of the most prosperous times in the history of the world , yet we ’ re not saving . Why ?
Well , here ’ s a short list of lame excuses that people give to justify not saving .
1 . I ’ ll do it later . This is a common excuse among young people and probably the lamest . A young person in their 20s thinks “ I ’ ve got 60 years to save money . I need to enjoy myself now .” If you ’ re in your 20�s , NOW is the time to save . You have plenty of time to let the magic of compound interest grow your wealth . Start young and you can save less and still make more money in the long run than if you started to save later .
To give you an example of the power of compound interest , consider two different people- Jack and Jill . They ’ re both 22 years old and both have an extra $ 2,000 a year . Jack takes his extra $ 2,000 and socks it away in a IRA Account with a 12 % return . Jill on the other hand spends her $ 2,000 .
Jack saves $ 2,000 a year for 6 years and doesn ’ t save a dime after that . ï ¿ ½ Jill spends her extra $ 2,000 a year for 6 years , but decides she should start thinking about the future . She fi nally opens up an IRA account with the same 12 % interest that Jack gets . She invests $ 2,000 each year until she ’ s 65 . The chart below shows the value of Jack and Jill ’ s respective accounts when they ’ re 22 years old . Remember that Jack only invested $ 12,000 while Jill invested $ 74,000 .
22 // OWNER OPERATOR // AUGUST 2013
OO 0813 edit . indd 22 7 / 8 / 13 11:43 AM