Page 38 - Book2E

Those that understand interest collect it. Those that don’t, are doomed to pay it.
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broke for the same reason they are overweight or out of shape. “We don’t make the choice to have the discipline. Most spendaholics are people who spend beyond the point of satiation, just like overeaters. You can design a budget to give you some elbow room so you have the money to do the things you want—but you have to set a limit, and you have to set it in advance.”
If you find yourself repeatedly without money when emergencies arise, perhaps it is time to take a good look at your financial habits. Erik Hurst found that “households who enter retirement with lower than ‘normal’
wealth do so because they had consist- ently followed near-sighted consumption rules during their working years.” In other words, they always had poor saving habits and spent all their income rather than sav- ing any. Contrary to what the grasshopper might believe, Hurst found “...these house- holds had similar opportunities to save” as
the households that entered retirement with sufficient savings. If you need to change your saving habits, the time to start is now.
A Retirement Formula That’s Worth Thinking About
In most circumstances, the older you get, the more you are able to save. By following the steps listed below, you can become a millionaire. The following example reflects investing in mutual funds that earn an annual average return of 8%.
1. Invest $50 a month for the first 4 years ($1.67 per day).
2. Invest $250 a month for the next 5 years ($8 per day).
3. Invest $500 a month for the next 15 years ($17 per day). 4. Invest $1,000 a month for the next 13 years ($34 per day).
Retirement: Are You an Ant or a Grasshopper?