Myths That Keep You Broke #3

Myth #3 - You have plenty of time:   

When I was young I thought I had plenty of time to plan for retirement. The myth that you have plenty of time to plan is deceptive. And the word retire was the word that was used to talk about a time when someone could choose not to work and still have enough money coming in to support their standard of living.

You DO NOT have plenty of time; you need to start now, today, and allow compound interest to work in your favor.

As an aside, I prefer to avoid using the word “retire”.  On a farm when a cow can no longer produce milk they put it out to pasture to die. The term for that is to retire the cow. Do you like the idea of becoming useless and being put aside to die?

Instead, I prefer to talk about having Complete Financial Choice(TM); choosing to work, or not work; choosing to travel or not travel; choosing to volunteer or not volunteer.

How does that sound to you?

Back to the topic for today; time.

You have two choices when it comes to creating wealth:

  1. Long periods of time, taking little risk with small amounts of money.
  2. Short period of time with high risk, and possibly small amounts of money.

First I have to give you my definition of wealth: When you have enough passive income to fully support your standard of living. That includes home living expenses, personal expenses, travel and/or however you choose to live your life.

Choice 1: Albert Einstein is quoted as saying, compound interest was the eighth wonder of the world. As an example; if you earned 12% on $300 per month for 10 years, you would have invested $36,000 and it would grow to $69,000, or almost double.

But in 20 years you would have invested $72,000 that would have grown to $297,000, or more than four times your investment.

But here is the magic; in 30 years you would have invested only $108,000, and you would have a whopping $1,048,500, almost TEN times what you invested!

And while you were only putting in $300 per month, the income from your investments could pay you $10,485 per month at 12%, without ever reducing your principal. Let’s say you were insecure about continuing to earn 12%, and instead moved it to investments that only paid 6%, you would still have a monthly income of $5,242, or 17 times more than you were investing.

My son is a Chartered Financial Analyst (CFA) and Certified Financial Planner® (CFP), and he said only a 3.5-4% withdrawal rate is appropriate. But my lowest return on investments is 6.5%. Obviously I have a difference of opinion with my son.

Choice 2: Because I found myself broke at age 50, time was not going to work in my favor, unless I took more risks with the small amount of money I was able to save. That is what I did by investing everything I had saved in three years ($18,000) into a multi-unit property with two others. We controlled the investment and in six years we sold the property for a substantial profit. My $18,000 investment grew to $130,000, which is about a 36% compounded annual return.

And during those six years I borrowed more money to make down payments on more multi-unit properties, and by the seventh year I was a multi-millionaire. So, if you are willing to take calculated risks, have little time and little money, you can still create wealth. It is never too late.

If you do not know where to get higher returns than the bank pays, contact us or buy a copy of the Wealth On Any Income book.

To Your Prosperity,