I’m getting close to retirement age. I have thought a lot over the years about how best to prepare for the next stages of life, and how I can teach my kids the principles that will help them be happy at all their milestones along the way. One principle seems to apply to the entire journey. It is this: a little bit over a long period of time equals a lot. Let me explain.
Surveys show that a lot of people my age have not saved enough money to retire comfortably. I have pointed this out to my kids and then asked them how much they think they will need to have when they retire. The numbers they give vary widely based on their current understanding of the value of money. After that discussion I talk to them about how they think they can save enough to have a good retirement. The youngest ones all equate it with getting a really good job, or growing a really successful business and making a lot of money so they are “rich”. I explain that those things will certainly make it easier, but there is another way, too. Then I walk them through a little formula.
I ask them if they think they can put together an extra $25 per month from the time they are 15 years old until 20. To encourage them, I point out that $25 per month is equivalent to a couple of lunches out these days. They agree it is possible. Then I explain that if they started a little investment fund with $25 per month from 15-20 years old then made it $50 a month from 20-25 years old; $75 a month from 25-30; $100 a month from 30-35 and then starting when they are 35 (and have a pretty decent career going) start adding $150 per month until they are 65 years old the results would be significant. All of them think these numbers are way too low because they are sure they will be making enough money to invest way more than my formula. I tell them that is great and I hope they are right, but just to assume these numbers for our example.
Following this formula, and assuming an historical stock market rate of return (10%), they will have $1,070,000 when they turn 65. When we adjust for inflation, the value will not be the same as today’s numbers, but if the buying power is cut in half making it just $535,000, they would still have significantly higher amounts than the majority of retirees today.
If they are doing half as well as they think they will and change their monthly investment number to $350 per month when they turn 35 years old, that number at 65 will be $1,525,000. When you add Social Security (assuming it still exists!) and the equity value grown in the home that they paid down /off during those years and their 401k and IRA from work, life insurance etc., they should be just fine.
This post isn’t about financial planning. It’s about a Principle that applies to all of life. Here are a couple of other examples. Need to lose some weight? (Most of us Americans do). Try cutting just one item from your daily food intake that is high in fat or sugar or carbs. (Lots of folks can do this with soda). Cutting just one item while keeping the rest of your diet the same can make a big difference over time. Or, start walking 15-20 minutes each day and leave your diet the same. Everyone I know has 15 minutes free, just like my kids have $25 a month, if they want. It’s just a matter of deciding to do it now, as opposed to hoping something will happen in the future that miraculously fixes our issue.
How about this one? Read a good book (or better yet the scriptures) for 15 minutes per day. That would equate to 6 hours a month, even if you miss one day per week. It also equates to 72 hours per year. Bet you could learn a lot of good things from reading 72 hours per year!
Here is the real value of this. Once we try a little bit and allow it to go on for a while, we start to see our money grow, our wasteline trim, our gospel understanding and faith increase. These successes become incredible motivation to increase our efforts. The investment amount, the exercise and the reading times all increase because we start to see what our small efforts have produced and we get very excited about more success. When I learned I had type 2 diabetes, I got determined to lose 15 pounds. I got more motivated as the pounds came off and it became 25. Now I am realizing it can be 35, at which point I will be at my college age weight. That feels pretty cool!
So often we are tempted to compare ourselves in our current state with our very best possible self. This leads to discouragement or even depression, and feelings of hopelessness and failure. This is also one of the great dangers of social media, when we see the very best presentation of someone else and compare it to our own very worst. We never look or feel good about that comparison. Stop it! Consider what you really want, then without “psyching yourself out”, start with a very small adjustment on that path. You only have to do it one day. Then eventually, it can become every day. You will very soon be able to see that a little bit over a long period of time equals a lot.
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Jerry is the author of “Partners with God, Using His Teachings and Example to Raise Our Kids” and has been a guest speaker at numerous gatherings, firesides and organization events, as well as working as a facilitator for individual families.
Jerry and his wife Melanie are the parents of 12 children and currently have 13 grandchildren.