Key takeaways:
- Time, if used wisely can be super powerful;
- Adding small pieces of time together, it becomes a big chunk of time;
- Use your time wisely, because everyone has 24 hours each day, no matter who you are.
Time can be a very powerful tool, if you are aware of it and if you use your time wisely. Let’s look at ‘time’ through a few examples.
Your financial planner will tell you that time buys you money in many ways (if your financial planner is a good one). So, how much does a cup of coffee cost you? Say, 5 dollars. If you buy a cup of Starbucks each day, then it will cost you $1,825 after 365 days (that’s an year). If you do this as a habit during your working career, say 40 years, then you will give Starbucks $73,000 before you retire. This $73,000 is the ‘present’ money. If we consider future price and inflation rate as 1.5%, then this $73,000 will become $102,349 when you retire.
If you put that $5 note into your piggy bank, then by the time you check it again on your retirement day 40 years later, the piggy bank will have almost $100,000 for you. What can you do with that $100K? ^_^ The power of that $100K is not that $5 note, but that magic factor, time; 40 yrs! That’s the so-called ‘latte factor‘ in personal finance.
So, if you put $100 aside each month (that’s $1,200 each year) in an index fund that tracks Dow Jones index, then how powerful 40 years can be? Dow Jones index has an average return of roughly 10% per year for the past 40 years. Assuming this performance keeps going for another 40 years starting from 2019, then by your retirement in 2059 (40 yrs later), you will have …. $585,422 in present 2019 dollar value. That becomes $1,061,966 in 2059 dollar value and you are a millionaire!
The question is what did you do with that $100 in last month? That’s $25 per week. That’s about one nice lunch with a decent main course and a drink. That’s also about just a decent main course for a nice dinner for that week. So, if you dine out one less time per week for your working career (by having dinner at home), then technically and financially you’ve just turn yourself into a millionaire by doing so.
This is why time is powerful and Warren Buffett is the true master in time. He turns small money into large amount of money by choosing a right investment target and wait for the magic of time to make his company a huge fortune. You can be the next millionaire or Warren Buffett, if you know how to use your time wisely.
Time can be your best buddy in your life and career. In my next post, I will show you how to use your time to achieve goals without knowing that you are achieving your goals. How nice!
See you next week.
Dr. C. Richard Wu @ REEAConsulting.com
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