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Waiting to Invest?  Here's Why You Can't Afford to Wait.

September 14, 2018   By Henry Dominguez

Hey Readers!  Quick note before we dive in:


This is a post about the importance of long term financial investing.  My intention is to change the way we think about money and to improve our financial intelligence.  If you're planning on starting a business, or you're ready to improve your financial situation, this is for you. It's difficult to time the market and impossible to know what the best investment opportunities are for you.  However, if we start preparing ourselves now, we can increase our ability to take on more risk over time.  As you may have heard before; no risk, no reward.

Disclaimer: This is for informational purposes only and does not intend to be a complete description of investment or financial advisory services. 

I've been investing for the last 15 years. When I was 19 years old I started investing $100/ month. Now I'm investing over $400/ month and I plan to continue increasing my contributions every year.

I've also reviewed the performance of my portfolio over the last four years and have seen as much as 20% returns in a single year.  This isn't the case every year, but the economy moves in cycles, some years are great, some years can be disappointing. 

My goal is to grow enough wealth so that I can have more freedom and control over my work and quality of life.  I also believe that the more I have, the more I can give.  And the wealthiest people in the world are (sometimes) the ones that give the most.

Have you thought about investing but decided to put it off because you think you can't afford it?  The truth is, waiting to invest has its cost, here's why. 

The following example is to establish an understanding of how financial investments can make a significant difference through compounding interest over long periods of time.  


I recognize that not everyone can set aside the same amount of money I have, so I created a hypothetical example with these parameters. 

$200 per month at 6% return.

A good starting point for anyone is to set aside about 10% of your monthly income, but you can also start with $50 and work your way up from there when you're ready.  It's up to you.

This is what 1 year of investing $200/ month looks like, assuming a 6% return, on a monthly schedule.
Financial Plan _1 year.jpg

$200 x 12 months = $2,400

At an average 6% return, you will have $2,467 at the end of the year.

You made $67.  Good Start.
Starting Early (Start Now)

It may not seem like much, but if you continue investing $200/ month when you're 

20 years old, and stop contributing after 10 years, you will have a higher balance when you're 60 than your friend who starts investing $200/ month at 30 years old, for 30 years. 

This graph shows the timeline for two investors starting at different times:  

$200 per month at 6% return.

Amy and Brian

Because Amy started investing 10 years before Brian, she will retire with more money by the time they are both 60.  She didn't work harder and she didn't get a higher return.  She just started investing earlier.  
The following graph shows their monthly contributions and total contribution time. Amy invested $200/ month for the first 10 years, then stoppedBrian invested $200/ month for 30 years.
Monthly Contribution         Contribution Time
Amy                           $200                            10 years
Brian                          $200                           30 years 

monthly contributions-01.jpg
The next graph shows their total contributions and total investment time. Amy's total contribution was $24,000 over 10 years, then she waited for 30 years. Brian's total contribution was $72,000 over 30 years.
Total Contribution          Investment Time
Amy                         $24,000                      40 years
Brian                        $72,000                      30 years

monthly contributions-02-02.jpg
Monthly Contribution      Contribution Time      Total Contribution      Investment Time     Ending Balance
Amy                           $200                          10 years                   $24,000                  40 years                $164,952
Brian                          $200                         30 years                   $72,000                  30 years                $160,809

Amy contributes $200 per month for 10 years.  

$200 x 12 months =     $2,400 x 10 years =   $24,000 total contribution

Her total Investment time = 40 years

Her ending balance = $164,952


Brian contributes the same $200 per month for 30 years

$200 x 12 months =     $2,400 x 30 years =   $72,000 total contribution

His total Investment time = 30 years

His ending balance = $160,809

This next graph shows a comparison of their projected investments every 10 years, assuming an average 6% return.


     Amy                    Brian

Year   1                  $200                      $0

Year 10             $32,776                   $200

Year 20             $59,632              $32,776

Year 30             $90,663              $70,646

Year 40           $164,952            $161,309

Amy invested $24,000 and got back $164,954.
Brian invested $72,000 and got back $160,809. 

Do you see the difference? Brian contributed 3 times more than Amy, so how does Amy have a higher balance than BrianShe didn't work harder and she didn't get a higher return.  She just started investing earlier.  

As designers, we are trained to think critically and creatively.  Investing is about our  capacity to use that creativity so that we don't have to continue trading our time for money. Regardless of your economic condition, your age, or where you are in your career, I believe you can become an investor. 


So, do you want to continue working for money, or do you want to start having money work for you?
Use time to your advantage...Start now!

Want to take a look under the hood? The table below shows the schedule for Amy and Brian every year, by the month, assuming an average 6% return every year for both investors.

If you want to start investing you might be wondering where to put your money . There are lots of options, stocks are one of many. And there are also different types of accounts that rely on stocks including, actively managed accounts, robo-advisors, and Index funds, to name a few. This can be overwhelming.

In my next post I'll explain how to get the most out of the market, and why I hate 401(k)s.

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