I know it has been a while since I talked about any money issues so I figured it was about time. When I talk to people about investing I always get the same two reasons why they cannot do it. The first reason is they do not know enough about investing and the second reason is they do not have any extra money to even use for investing.
For the first excuse there is a solution. Invest in index funds. Index funds simply follow the market. If the market is down, they will be down; if the market is up they will be up. You do not have to know anything about the market to buy these funds. Investing in the overall market is not a bad idea afterall. Over any 20 year period in its history, the market has never lost anyone any money. In fact, the S&P 500 index annualized return is about 10%. And truth be told, most managed mutual funds do not out-perform these index funds over the long term.
The second reason is always the tougher one. Where does this extra money come from? I think if you honestly look at your situation you could find the extra money, but with keeping up with the Jones’ and buying all our neat toys, we are just not willing to do it. Retirement is a long ways away anyways. Americans are notorious for not being able to think about the future. It is always what can you do for me now. Whether it be politics or money.
The best way I can explain this inability to look ahead is to tell you to take a drive down Fairmont in Houston. Every single day I see car after car fighting for pole position at the next red light. As I drive the speed limit they will ride my bumper and then race by to the next red light, which of course, I have already seen long ago. I can then only laugh as I pass them because they have not realized they are in a lane that backs up every single day. But I digress.
Say you are a smoker. If you smoke a pack a day and quit, you would probably then have an extra 100 bucks to spare. Do you have the premium package for your TV and watch about 10 of your 400 channels? Do you pay a fat tax to local gym? Could you cut out how much you eat out each month to find a few extra dollars. My point is I am sure you could find the extra money if you needed to. And it doesn’t take that much money to build a small nest egg.
If you invested 80 dollars a month in an index fund for 25 years….this is what you would have at the end. You would have put in $25,000 of your own money. The simple earnings (earnings from your 25,000) would be $32,500 and the compound earnings (basically earnings from the earnings of your 25,000) would be $50,600 for a total of $108,000. Invest 160 bucks a month and you would of course have double that, $216,000. If you were to max out your IRA, you would have $541,000. As you can see, investing a small amount now each month can make a big difference later. You just have to ask yourself if that new TV or new car is worth it.
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Why bother – I can spend my entire check and then some while expecting the govt to pickup my tab on my overdue mortgage payments.
While I’m at it, I’ll stop paying for my healthcare (money I can spend on a new SUV) and then whine why the rich keeping getting richer.
Mike
I definitely plan to default on my house loan if Obama gets elected. Its not my fault I bought a house I can’t actually afford.
I want a free house too.
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