The Four Obstacles to Building Wealth
As you begin trying to accumulate wealth, you’ll encounter four major obstacles. The first is the most deadly, but if you think it’s the economy or taxes, you’re wrong. Your biggest enemy, as I can attest from having worked with thousands of people just like you, is yourself. Without question, procrastination is the most common cause of financial failure.
To understand this, consider the story of Jack and Jill. You know Jack fell down the hill, but you didn’t know that he suffered head injuries. As a result, Jack decided not to go to college. Instead, at age 18, he got a job, enabling him to contribute $4,000 to his IRA each year. After eight years, he stopped, having invested a total of $32,000.
Meanwhile, his sister Jill, inspired by Jack’s accident, went to medical school. At age 26, she began her practice and started contributing $4,000 to her IRA. And she did so for 40 years, from age 26 to 65. She invested a total of $160,000 and she put her money into the same investment as her brother Jack. Thus, Jill started investing the same year Jack stopped, and she saved for 40 years compared to just eight years for her brother.
By age 65, whose IRA account do you think was worth more money?
Assuming Jack and Jill each earned a 10% return, Jill accumulated $1,327,778 but Jack collected $1,552,739 -- $224,961 more than his sister!
While Jack had invested only $32,000 to Jill’s $160,000, his money earned interest for eight years longer than his sister. It wasn’t the money that made him successful -- it was the time value of money. Jack didn’t procrastinate, and by investing sooner than Jill, his account grew larger.
I have heard the complaint that procrastination does not belong at the top of my “Enemies of Money” list. There must be other, more serious causes for financial failure, right?
Wrong!
Rescue Your Money, written by award-winning financial advisor Ric Edelman, is your personal investment recovery plan.
