Tuesday, April 6, 2010

From spendthrift to saver

So since compounding is such a powerful tool, how can you use it to improve on you current situation? Let’s take a example of a guy aged 50 years old whose lifestyle obligations is out of control, leaving him with the inability to save for his own retirement.

Even though he is left with just 15 years to go before retirement, he did not want to talk about it or even think about it as he think that he will never be able to retire.


If you think that you can still continue to work after age 65, you might want to think again as many people cannot continue to work due to illness, disability or lack of available jobs. So, do make sure you have make savings for retirement a top priority.

He is like everyone else who did not do any planning for their retirement when they should. They are all fearing and facing the unknown and doing nothing. Most people make decisions based on today, and not tomorrow. This is because they cannot see beyond today because tomorrow might never come for them, how are they able to plan for fifteen years or more ahead?

He will need to channel energy to face the fear and take charge of his future. It does not require him to take a big step to make a difference. But, the longer he waits, the more he will stand to lose out.

Assuming starting today (at age 50), he starts to save $5 a day ($150 a month) until he retire at age 65 and investing the money at a return of 8%, he will have $52,783 at the age of 65 when the total amount saved is $27,000. Let’s say he reinvest the total amount of $52,783, by the age of 75, that amount will snowball to $113,954, by the age of 80, it will be $167,436.

The bottom line is that the longer you allow the earnings on your investment to be reinvested; you will have more money after you retire. Start today by giving yourself a little money and a lot of time to make sure you can attain retirement security.

Start by changing your mindset from “I don’t have anything left to save for retirement every month” to “how much can I save today to start compounding right away?” Just a small change to your spending habits can make a big different for your future and provide for tomorrow.

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