The best time to start investing is right now

Really, right now. Time works for your investments.

There are many reasons to put off investing: it’s too complicated, later when I make more money, when the kids are older, when my debt is paid off, when I have free time to research about investing

However, it’s easier to reach your financial goals the earlier you start.

It is important to not only save but to invest. Long-term investing in a diversified portfolio has historically outperformed a simple savings account.

If you invest $200 per month in the S&P 500 (US stock market) for 40 years (like Guy), you will end up with over a million dollars.

If you wait 20 years to invest (like Sal), you will need to invest about $1,650 per month to reach a similar amount as Guy. Waiting to invest is costly. Every year you wait to invest means you will need to invest more each month to reach the same goal.

Instead of investing only $200 per month, like Guy, for a longer period of time, Sal needs to invest a much larger monthly amount ($1,650) because he waited.

Another way to look at this is comparing Guy to Maria, Sandy, and John.  All four of them invest $200 per month. Guy invests right away for 40 years, Maria waits 10 years and invests for 30 years, Sandy waits 20 years and invests for 20 years, and John waits 30 years and invests for 10 years.

Guy will end up with over $1.2M, Maria about $452k, Sandy $152k, John $41k.

Waiting even 10 years makes a huge difference in the total amount saved. Guy will end up with about 3 times more than Maria by starting 10 years earlier.

Maria will end up with about 3 times the amount Sandy will have by starting 10 years earlier than her.

We all have excuses for waiting and not investing now. It is easier to spend now than wait and invest that money. We all have things we would like to buy and spend money on now. But we also have long term financial goal – like retiring. Reaching those goals take sacrifice but they are easier to reach if you start investing now.

Calculations used in this post assume a 10% annual rate of return.

To reach financial independence, spend less than you earn and invest the rest.

– Bill & Ivan