Invest Less Right Now and You Will Make More Money

This statement is a bit of an oxymoron, yet it is very true thanks to the power of compound interest.

To explain this idea, I will offer up a story about two investors, Mr. Invest Early and Mr. Late Start. Mr. Invest Early and Mr. Late Start were cousins of the same age and both had a goal of purchasing a brand-new vehicle for cash in 10 years’ time. They estimated that this vehicle would cost them about R232,000, and in order to save for this vehicle, they would each need to invest R1,000 per month at an annual return of 12%.

Neither could afford to invest R1,000 per month, so Mr. Invest Early decided to invest R500 per month while Mr. Start Late only started investing R1,000 per month ten years later. Forty years later, when Mr. Invest Early and Mr. Late Start decided to retire, Mr. Invest Early had accumulated R5,941,210 after investing a total of R240,000 (R500 x 12 x 40), while Mr. Start Late had accumulated R3,529,913 after investing R366,000 (R1,000 x 12 x 30). Thus, Mr. Invest Early not only accumulated more capital over the period, but he also did it with less money.

The effect of compound interest is so powerful that by achieving just a 1% higher rate of return over forty years should provide an investor with more than eight years’ worth of additional income at retirement. It is therefore essential that when investing, you should get good advice. Receiving advice from a Certified Financial Planner (CFP®) not only increases your chances of getting better investment returns by assisting you in implementing effective investment strategies, but also by maximizing investment returns through simple yet effective tax strategies.

The biggest destroyer of wealth is procrastination, so don’t delay. Start investing right now and tell your children, your family, and your friends—this might just be the best thing you ever do for them.