RealSmartica

Educate parents and young adults in practical money matters

Facebook
LinkedIn
Twitter
  • Home
  • Contact
  • A Resource for Schools
  • Podcasts
  • College Planning
  • Financial Housekeeping
  • Money Lessons for Kids
  • Women and Money

Investing Your Time Productively

June 3, 2011 By Dina Isola Leave a Comment

“Hello I’m a procrastinator,” I may as well have introduced myself in this manner at the training session on time management.  It turns out, I was in good company.  Though I didn’t realize it at first, the room was filled with others who shared my dirty secret.  The instructor stood at the front of the room holding up the calendar/planner and asked us to start our day – as we should every day – with a to-do list.  When our pens stopped moving, he asked us to prioritize our list with A for urgent, B for important, and C for keep on track.  Next numbers were placed after the letters to further prioritize the list: A1 being the most important, then A2, and so on.  It seemed simple enough, and yet I found myself itching to tackle C3 and B2 first.  These were projects I knew what to do about.  These were things that would produce an immediate reward to my efforts.  A1 —  well, that one I wasn’t sure how to start.  Once I had these goals and priorities written out, it was hard to justify wandering off to handle the less urgent issues.  I felt better, though, when most everyone in the room giggled nervously when the instructor asked how many of us were not even looking at the As, but were thinking about the Bs and Cs.

 

Financial matters are a lot like those A1s that seem overwhelming or perplexing, so we jump ahead to the more interesting B and C issues – like shopping for a new car, or planning a weekend trip.  Even the “not so interesting” things on our list take a priority because they have a deadline – like paying bills, for instance.  The truth is, while there is no “deadline” imposed by anyone on your financial management, it is up to you to set them.  If you don’t, time has that funny way of passing by very quickly.  Before you realize it, a whole year will pass before you call to get the forms you need to Rollover your 401k from your previous employer, set up a Roth IRA, or the open the kids’ college savings accounts.  There is no bill that is sent showing you what you miss out on, but the reality is that time is the most powerful tool in growing assets.  The table below gives a snapshot of how planning ahead, and making the best use of time can be a powerful wealth builder.

 

The Planner and the Procrastinator are the same age, but The Planner invests early on, contributing $2,000 every year to an IRA starting at age 22.  Though the Planner only makes these investments for nine years (a total of $18,000) versus the Procrastinator, who invests $70,000 over 35 years, the Planner ends up with $109,222 more at age 65.  How?  The Planner started investing 10 years earlier, and time alone made all the difference.

  

The Price of Procrastination

Based on an Average Annual Return of 9%

 

                                    The Planner                           The Procrastinator    __________   

                                    Invests $18,000 in an IRA         Invests $70,000 in an IRA over 

                                   over 9 years (age 22 until 30)      35 years (starts investing at age 31)

Account Value at 65   $579,471                                 $470,249                                            

The Planner Invested $52,000 Less than The Procrastinator,

But Earned $109,222 More.

 

Source: National Endowment for Financial Education

 

This example proves that wealth can be built with little investment if you maximize time.  Of course, had the Planner kept contributing for 35 years, the results would have been even more impressive.   So what do you do if you feel time has passed you by?  The point is not to fret over what has already passed – you can never regain it – but to get on track as quickly as you can, so that you make the most of the time you do have.

 

Like time management, a thorough to-do list will get you focused on what you want to accomplish.  Paying off credit card debt, establishing an emergency fund (3 to 6 months of income), opening a retirement account, and setting up college savings are the basic places to start.  Next, look at what you can realistically contribute every month to work towards these goals.  Finally, treat this commitment as sacred as your rent or mortgage payment.   

 

While it is easy to get caught up in the day-to-day grind of living and get sidetracked, when you make these goals an A1, you are, in effect making yourself and your family an A1.  That, I believe, is a very productive use of your time.

 

 

Do You Know…

  • …How Long You Might Live?  The Average life expectancy for a woman is 80, and 77 for a man.  That means half of all people will live longer than this.  If longevity runs in your family, you should think about have retirement savings that can take you through to age 90.
  • …How Much You’ll Need to Retire?  Some say you’ll need to withdraw 70% of your gross pay (before retirement) every year to cover your living costs.  A more conservative approach  is to look at your pre-retirement salary and deduct expenses that you shouldn’t have in retirement (like social security tax, mortgage payments, and contributions to your retirement plan). 
  • …How Time is the Greatest Grower of Assets?  Like the example above shows, it is not how much you invest, but how long you invest for that makes the biggest difference on your results.  Wealth can be built with small, consistent investments over time.  But you can’t procrastinate!

 

Check out http://www.atiinvestment.com for calculators to help you plan for retirement based on life expectancy, income and your current retirement savings.

Filed Under: Blog, Building Wealth, Financial Housekeeping, Saving for Retirement

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Dina Isola

Since 2002, Dina Isola has worked closely with investors, hearing their concerns. Drawing on her experiences and challenges, Real$martica was born, which focuses on making personal finance issues relatable to women, children and families and educating investors to make informed decisions. A contributor to A Teachable Moment, she is a client relations specialist at Ritholtz Wealth Management. She also serves on Stony Brook Children’s Hospital Task Force.

*Disclaimers

  • Disclaimers
  • Privacy Policy
  • Terms & Conditions

Recent Articles

  • Mid-Year Pump
  • Break Free
  • Lazy Discipline
  • Mindful of Your Money
  • Stop Apologizing, Start Accepting
  • Reaching Your Financial Resolutions in 3 Easy Steps
  • When I Find Myself in Times of Trouble
  • Time to Think

In the news..

Mortgage Stories
Bankrate.com
Retirement Stories
Bankrate.com
Read current mortgage rates and home loan stories.
Read the latest retirement planning topics and trends.

RSS College Tuition News

  • Students Earn Salary While Going to College in New South Bay Program - NBC San Diego
  • Emergency Loan Uses & Alternatives - Bankrate.com
  • How much does it cost to be in a sorority? - Yahoo Finance

RSS Personal Budget News

  • Debt And Mental Health Statistics - Bankrate.com
  • Digital Personal Data Bill to be introduced in second half of Budget Session: Govt to SC - Economic Times
  • Amid 'unprecedented' prolonged revenue boom, state finds budget ... - NPR Illinois

© Copyright 2016 Real$martica · All Rights Reserved · Powered by WordPress ·