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When you ask people in their 40s what they would have done differently with their money, to a man they say, “I would have started saving earlier.”
People always think they’re going to have plenty of time to save later. Right now they’re busy drinking beer, buying cars, and going on vacation, and that’s as it should be. When I ask the inevitable question, “When?” they stare at me with blank expressions. I push. “When? When will you start saving?”
If you have an I’ll-get-around-to-it attitude towards saving, ask yourself, “When?” Will you have the money after you’ve taken on the added financial responsibility of a home? After you’ve had some kids? After you’ve paid off your credit cards, line of credit and mortgage? And how much time will you have for those savings to do you the most good?
The thing about starting sooner rather than later is that time on your side means your money will grow more. It also means you won’t have to take as much out of your cash flow to have what you need later.
If you start saving in your early twenties, you need only put away about 6% of your net income to end up with enough to maintain the lifestyle you enjoyed before you retired. Wait until you’re in your thirties to start saving and saving 10% is the very least you can do. Delay until you’re in your forties and you’ll have to sock away 18% of your income to have what you’ll need.
So would you rather save 6% of your income over your working life or have to come up with 18% just as your kids are heading into university? Hey, it’s your call.
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