Retirement feels like a foreign concept to those who are just starting out with their careers. It almost always becomes real only when people reach their middle age. While it is never too late to be saving for retirement, it is incredibly beneficial if you can start early. Those who are blessed enough to be financially literate from a young age will be able to do the following:
Take Advantage of Compounding Interest
Even a small sum can grow to a tremendous amount if you are able to apply compounding interest for a good number of years. Having a 30 to 40-year plan is ideal. If you are able to save just $10,000 per year for the next 40 years with an annual interest of 4%, then you will have $1,278,397 at the end of that period instead of the plain total of $400,000. That’s enough to retire comfortably without depending on what the government may or may not provide. If you only had 20 years to do the same exercise, then you would need to find an investment with a guaranteed return of 15% per year to have similar results.
Avoid Frivolous Expenses with a Firm Goal
We live in a world where we are bombarded with advertising. It’s on the television, the billboards, the newspapers, the magazines, the popular social media accounts, the websites, the emails, and so on. We also see our friends and family display their new stuff on our feeds. It’s easy to think that we are missing out if we aren’t doing what the rest of the people are. We even travel using credit card debt and drive brand new cars with massive loans. If you know your goals in life, then it is easier to say no to these frivolous expenses so you can save more.
Retire Early and Enjoy Financial Freedom
Frugality does not have to mean self-imposed poverty. You can still live a good life without spending an unreasonable amount of money. It really depends on your current finances and your future goals. Study what you need to do to get from here to there. If you are able to follow your own system, then you will be far ahead of your peers because you will be able to retire early and enjoy financial freedom throughout your journey.
Saving for retirement is never easy but starting early is a great advantage. Avoid debt, save smart, and have the patience to do what needs to be done.