What do we send our money to do?
We can be pulled in a thousand different directions to spend our money. Shopping, dining, charity, gimmicks, home improvements, are just some of the things. we can send our money to.
A funny movie moment that sticks in my mind is in "Back to the Future". I hope you have seen it... really great movie! Anyway, at the beginning of the movie the main character Marty McFly is hanging out after school with his girlfriend Jennifer. They are sitting on the park bench talking about their weekend plans. The two go to kiss and a lady shoves a clanking tin can full of change right in their faces screaming "Save the clocktower! Save the clocktower!" She dives right in to her monologue about the clocktower being struck by lighting and how they need to donate money to refurbish it. Marty, trying to save the moment with Jennifer, drops a couple coins in the can with a klink saying, "Ok lady here you go."
Sometimes I feel like Marty, interrupted in my life by someone wanting money for a cause or for a service they have to offer. Sometimes I feel like if I just put money in someone's jar, my problems will go away. It's dangerous when I fail to give it serious thought and just throw my money away for "convenience" sake or because someone pressures me to spend my money on a whim. Don't get me wrong. It's good to give to charity and causes. It's just not good to give when you don't have the extra money.
What we need to ask ourselves is what is the wise thing to do with our money?
I'm advocating for this. Instead of working hard for our money, let's get our money working hard for us. Instead of spending our hard earned money to satisfy someone else, why don't we put that money in a place where it will work for us.
The perfect place to get our money to work for us is in a retirement plan. When we put our money in an Individual Retirement Account(IRA) we are putting that money to work. Follow this scenario...
If a 25 year old puts $100 a month over 40 years in a savings account they would have right around $50,000 with a .06% interest rate(average for a savings account). That's a good amount of money to save right?!
But what if that 25 year old took that same $100 a month and put it in an IRA for 40 years? With the average growth rate for an IRA being 12%, when he retires 40 years later at age 65, he would have $1,176,476! That's what I mean by putting your money to work!
But let's say that 25 year old decides to spend his $100 a month instead of investing in an IRA. Let's say he waits 5 years and starts investing at age 30. If he puts $100 a month in his IRA for 35 years and retires at 65 he will have $643,095. Still that's a big number...but it's not $1.2 million!
The sooner you start investing the better off you will be. Don't wait! Don't be pressured into wasting your money. Put your money to work and reap those big time benefits!