Time is Your Best Ally

Time is your best ally when it comes to investing

When it comes to investing, lots of beginners just don’t know where to start. That can be a problem, because instilling bad habits from the onset means that changing them down the road is more painful. And it means that going the easy route while you’re young can make for a more challenging future.

After I graduated college, I got a job in IT making decent money. I wasn’t rolling in the dough like some folks, but it was a comfortable salary. I remember not being content with the paltry 4% match provided by my company’s 401(k), so I doubled my share to 8%. With their match, I was putting a whole 12%.

While twelve percent isn’t exactly something to write home about, it got me started. And that’s really the point – to start. Sadly even this is more than most people contribute.

Time Makes the Biggest Difference

Your contribution habits are a huge influence, but there’s something more important than how much you’re putting away: how long you’re putting money away for. The power of untouched money earning even 7% a year means that someone who is saving essentially doubles their money every 10 years or so. That’s happening magically, without touching a single thing.

Even though my contributions were meager, they’ve grown to a sizable sum over the past 7 years and will continue to grow.

I’ve not contributed anything in over a year to my first 401(k) (which I still need to roll over, ugh) but it’s added over $10k this year to my net worth for just existing.

Now that we’re starting to more aggressively save in our 401(k)’s and IRA’s, that growth will continue to accelerate. But the kicker here is that if I’d increased my contributions by a measly 2% when I started, I’d have an estimated quarter million dollars more when I’m ready to start tapping that money.

Identifying the Inflection Points

Clearly the sooner you start – and the more you invest – the better off you’ll be.

There are 2 major inflection points I’m shooting for with my investments. The sooner I’d started investing, the sooner these points would have been hit.

First, the point where my money works harder than I do. There will be a point at which my investments will actually start earning more money than I can contribute. Since I slacked a bit at the beginning of my career, I’m not at that point yet.

For an IRA which has a yearly max of $5500, that amount is just under $80k, assuming a 7% return. At this point, the growth more than doubles the contributions. The sooner you start, the sooner you’ll get to the point where your money works harder than you do.

The second point pertains to our goals. We want to retire by the time we’re 50 – just about 20 years away. To do so, we’ve figured out how much money we’ll need, assuming a paid-off house.

At some point in the future, our investments will grow to a point where we can hit our target portfolio balance without contributing another dollar. Compound interest can theoretically do its thing, and we can step off the gas if we need to.

More than likely we’ll evaluate our lives at that point and see what we want to do. It’ll be like being pre-financially-independent. Not exactly free quite yet, but with enough time and average market performance, we’d be fine.

Crazy Realizations

The crazy thing with these points is how much easier it is to hit them with even a small head-start. Contributing regularly to my 401(k) when I was 23, along with some good market performance for the past 7 years, has set us up well to hit our goals.

That original 401(k) will likely grow to just shy over a half million dollars by the time we’re ready to early retire. Definitely awesome, but it comes with another realization: if I’d maxed my 401(k) for just 7 years, I’d have enough money at 50 to retire even if I never invested another dime. Letting the money sit for 20 years would have been adequate to fund a modest retirement.

Nobody ever wishes they started investing later. They say that the second-best time to invest is now. There’s good reason for that.

Underestimating compounding means we’ll have to save pretty aggressively for 20 years instead of just sucking it up for 7 and then coasting to retirement.

The sooner you start, the better off you’ll be.

Weather the Storm

The other luxury you get when you start early is that you by definition have a longer time horizon. Markets tend to be cyclical, and volatile in the short-term. Being able to ride out the bad times by starting early will set you up for a better chance that your money will grow.

It’ll also protect you from your emotions. Knowing that you can stomach a market downturn because you started nice and early is often motivation for people to put more money into the market.

Not All Bad

Even though I am missing out on about a half a million dollars in my retirement accounts, it’s not all bad. Having the take-home pay I did allowed me to take the leap and move out to California. It’s where I met Kristin, and I have no doubt that if I’d maxed my 401(k) from the get-go my life would be drastically different, in ways I can’t even imagine.

I’d have had more money, of course, but would be less rich in other areas. Of course, everyone’s experiences will be different. All-in-all I think I balanced both pretty well in the beginning years, but it’s time to step on the gas now.


Do you ever wish you started investing earlier? How would it have changed the decisions you’ve made throughout your life?

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  1. I definitely wished I started investing SMARTER. I invested early, like when I was 20-21, but I didn’t do it properly. And that I didn’t panic during the downturn 🙂

    Hindsight is 20/20 of course!

    1. For sure! I think a lot of people got burned during a downturn or just didn’t invest the “right” way (index funds FTW) and so they got turned off to the idea and just hoard cash. 🙁

  2. Love it, when your money is working harder then you its got to be a great feeling. To many people get caught up with timing the market instead of just starting and being consistent. Not many people look back and say man I wish I would have never invested when I was younger what a mistake. I second GYM in that although it would of been a small sum I wasted money trying to trade stocks in college. However I would say that has saved me money now because I don’t repeat the same past mistakes.

    1. The ironic thing is that statistically, those who try to time the market actually under-perform those who just dollar cost average! Just quit over-thinking it, build systems to consistently invest, and sit back and watch your money grow over time. Even in a recession when your money shrinks, guess what: that means you get to buy more shares for the same amount, like buying stuff on sale! But people forget that and just see their money disappear on paper. Making paper losses turn into real losses is how folks get discouraged and never invest again… 🙁

  3. Nicely written Dave! I’ve been thinking about this issue a bit lately. I wonder if we, pf bloggers, might not be engendering a left behind feeling. Its interesting because you want people to save sooner, but what if someone discovers the post in their 50s? I guess to those people I would say, its not when you find it, but how soon after you start.

    Either way, great write up! and I really like the precise numbers you crunched for this.

    1. Still better to start today than to put it off, no matter your age. The only thing age really impacts is how much risk you feel comfortable with, and potentially what to invest in. If your time horizon is shorter, obviously volatility could take a pretty big toll on your investments – so you invest in something with less volatility (but less growth).

      Of course the younger you start the better, and my hope is some day some kid who’s just graduating high school or college takes some of this advice to heart. But even if you’re already 30 like me, you still have hope to retire early 🙂

  4. Already 30? 30 is nothing. So many have crippling debt, low-paying jobs, and other financial obstacles at 30. You’re super lucky to be in the position you are as many can’t save much of anything for retirement. Just a friendly reminder, because if you only surround yourself with FIRE types, it’s easy to lose perspective.

    1. It’s definitely easy 🙂 Kristin and I are super fortunate for being in a great position right now and have a lot to be thankful and grateful for. Thanks for the reality check 🙂 🙂

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