Saturday, May 11, 2013

Get 3x more money by investing early

If you can live with 90% of your income, it is possible for you to make a choice of saving or investing for the remaining money. If you can't live with 90% of your income, you need to concentrate more on your career to increase the income. As a rule of thumb, it is better to live with 90% of your income. I mean, it is better to spend less than what you earn and its even more better if you can save at least 10% of your income. 

Once you make sure you are living within your means, the next step is to invest as little as you can. Saving just makes the money safe but won't grow the money beyond the inflation numbers. If you are investing, it grows your money and gives you better return. Please read Begin Investing for more information.

Why should one invest early?
Investing early gives more time for you to grow your money. 

Lets take a small example. John and Joe are childhood friends and of same age. They earn the same amount of money. John invests Rs. 20000 every year and gets 12% returns from the year 2013 till 2030.
Joe, after seeing his friend investing for ten years, thought he also needs to invest. Joe also invests Rs.20000 every year and gets the same 12% returns from the year 2023 till 2040. So, both of them, invested the same amount of money and got same returns for 17 years. What do you think is their returns on their investments on the year 2050.

At the end of year 2050, assuming that they are going to get the investments out now for their retirement/children's marriage/higher education. 
John gets more than Rs. 1 crore (Rs. 1,07,55,561/-) and Joe get only around Rs. 34 lakhs (Rs. 3463003/-).

Please note that John and Joe invested the same amount of money and got the same amount of returns. But the only thing John did is investing early. Also, they invested only for 17 years. Just by investing early, you can get 3 times more than the person investing late. 

So, its plain and simple. Invest the maximum that you can as early as possible. 

Please share your thoughts.


1 comment:

  1. Very nice simple article written with informative and people need to know their needs and greedy is the important to earn.