NOW! vs. later

Growing up, and even still today, I heard about people giving advice to begin saving today, rather than putting it off until later.  But I’d never really thought about it until I started talking to my 16-year-old brother, and giving him the same advice…

If he makes a commitment to start saving $10/week now, in a year, he will have $520, even if he makes no interest on it.  If he socks it away in a “horrible” 3.5% APY savings account, he will be losing a little due to inflation, but he will still be ahead of where he would be if he waits to save…

If he waits a full year, even if he finds an investment vehicle that he can get 12% return on…  it will take him over 5 years to recoup the $520 he saves this year, even if he’s only getting 3.5% on that money…

Sure, compounding interest helps…  but what helps even more is getting started now, rather than waiting until later.

How does this relate to debt reduction?  Well, I started down the negative equity path very early in my twenties, and I’d accumulated about 8 years worth of debt before I started slowing down.  I actually didn’t start paying debt down until January 2007.  Somebody who didn’t jump into debt $8,000 the first year after they moved out is not only in $8,000 better shape, they are in $8,000 + the interest on the $8,000 + the amount they could have invested + the interest rate on the investment.  It probably looks more like $12,000.  That is HUGE!  Just one year of overspending set me back that much, and I have a similar story for several more years in there.

The key is, the sooner you begin to make a move in a positive direction, the better off you will be.