Could Waiting a Year Cost $140,000?

By Kevin Estes

Optimizing Finances Early

Many people put of financial planning.

That’s understandable! Life gets busy.

However, optimizing finances early can be impactful.

Let’s Look at an Example

A family is making progress. They own a home, have seen steady income growth, and save consistently.

Let’s say they make a series of changes:

• minimize lifetime taxes,

• maximize retirement plan contributions,

• make the most of their stock compensation,

• contribute to Roth and spousal Individual Retirement Arrangements (IRAs),

• reduce investment fees,

• pay down high interest debt,

• and maximize real estate and business cash flow.

Impact Depends on Time

Each of these impacts their financial trajectory.

Here’s how much impact the improvement has over 5 and 40 years:

The longer these changes have to take effect, the bigger the impact.

Hypothetical Example: Save $500 a Month

Let's say that through a combination of maximizing income and minimizing costs, a family is able to save and invest an extra $500 a month.

With an 8% annual return (compounded monthly), $500 a month turns into about:

• $37,000 in five years,

• $91,000 in 10 years,

• $295,000 in 20 years,

• $745,000 in 30 years, and

• $1.75 million in 40 years.

Impact of One Year

By the way, what’s the value of the last year?

Almost $140,000.

Waiting a year to optimize finances might cost $140,000 over the course of 40 years!

If you’re interested in a review of your situation, please…

Disclaimer

In addition to the usual disclaimers, neither this post nor this video includes any financial, tax, or legal advice.