Could Waiting a Year Cost $140,000?
Hello, I’m Kevin - a financial planner who helps tech professionals and their families live great lives.
Make yourself at home - we’ll get to the compound benefit of improvements in a moment.
But first - here are some links you may want to save for later.
Are Employee Stock Purchase Plans Underrated?
Turn $200,000 into $13 Million?
Now, let's get on to the vlog! 😀
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!
Hey, thanks for learning more about the impact of waiting a year to improve your finances.
Just a reminder, I share a lot of resources that can help you.
Disclaimer
In addition to the usual disclaimers, neither this post nor this video includes any financial, tax, or legal advice.
