Why 2022 Is Your Time To Start Investing
New Years brings on the resolutions and while many of us are focusing on shedding those extra Christmas Calories, I wanted to take the time to write about the power of investing.
The quarter life club is in the perfect situation as it stand with this market. Instead of focusing on where to invest your money, what stocks to pick, trading options, and playing the crypto markets, I’d rather focus on the most important factor of investing: Compound Interest.
Many of us dream of retiring early. Many of us have entry level jobs currently. The idea that we would have enough money to retire, travel, support a family, and buy a boat seems impossible. This is why it’s paramount to begin investing in 2022. For my quarter life club friends who just began their career, allocating a small portion of your salary toward investments won’t make you rich now, but will pay massive dividends later in life.
If you make $50,000/yr and invest 10% of your gross income into a well-balanced portfolio producing annual returns of 10% for 25 years you will have $1,081,817+. That’s assuming you never get a raise, never move jobs, and never invest more than $10,000/year. A $1M+ portfolio at 50 can produce ~$40,000/year of passive income in the form of dividends/withdrawals. If you never made more than $50k/year you just gave yourself an 80% raise!
If you wanted to wait 10 more years to retire, assuming the same financials as above, your portfolio would be worth $2,981,268+. The portfolio would produce ~$119,000/year in passive income!!! That’s nearly triple what you were making from working your day job.
Compound Interest is so simple and so important for our investments and financial security. We are not able to save our way to retirement while supporting a family and enjoying life.
I hear many people justify spending 100% of their income by saying, “YOLO and life is meant to be enjoyed”. While this is easy to say in your mid-twenties, this isn’t the case later in life when responsibilities begin to stack up. Having kids, sending them to school, health and life insurance, college tuition, travel, God-forbid taking a vacation or two. You don’t magically retire when you hit a certain age. This is why you see so many people in their 70s still working a full-time job. Lack of financial planning.
If you haven’t started, make 2022 the year. Remember the compound interest numbers from the above example. It only takes 25 years of average returns investing 10% of your income to be a millionaire!