WE HAVE BEEN TOLD DRAMATICALLY INCOMPLETE, IF NOT INCORRECT, INFORMATION ALL THESE YEARS. IN ORDER TO RETIRE COMFORTABLY, WE DO NOT NEED TO SAVE, THEN INVEST, JUST 10-20% OF OUR PRE-TAX INCOME DURING OUR 30-40 YEARS OF EMPLOYMENT. WE REALLY NEED TO SAVE AND INVEST 75% OF OUR INCOME FOR THE FIRST 10 OR 15 YEARS WHEN WE START MAKING MONEY (“Ma, I’m moving back into the basement!). THIS AMOUNT IS INVESTED INTO A PRE-TAX, LOW COST S&P INDEX FUND UNTIL WE RETIRE. I CALL THIS FRONT-LOADING OUR SAVINGS AND INVESTMENTS.

What we actually SAVE, even if our cost of living is much less when we retire, will not be even close to what we need in order to retire for the typical 20-30 years of retirement. We need the additional money brought in by LONG-TERM INVESTMENTS. During our working years, we will be adding fundsContinue reading “WE HAVE BEEN TOLD DRAMATICALLY INCOMPLETE, IF NOT INCORRECT, INFORMATION ALL THESE YEARS. IN ORDER TO RETIRE COMFORTABLY, WE DO NOT NEED TO SAVE, THEN INVEST, JUST 10-20% OF OUR PRE-TAX INCOME DURING OUR 30-40 YEARS OF EMPLOYMENT. WE REALLY NEED TO SAVE AND INVEST 75% OF OUR INCOME FOR THE FIRST 10 OR 15 YEARS WHEN WE START MAKING MONEY (“Ma, I’m moving back into the basement!). THIS AMOUNT IS INVESTED INTO A PRE-TAX, LOW COST S&P INDEX FUND UNTIL WE RETIRE. I CALL THIS FRONT-LOADING OUR SAVINGS AND INVESTMENTS.”

ISN’T THE PSYCHOLOGY AND MATH OF MONEY AMAZING? IF WE HAVE A SINGLE SHARE OF A $5 STOCK AND THE PRICE RISES TO $10 (ie a 100% increase, or doubling your money), TO ALMOST ALL IF US, THIS IS NOT A LIFE-CHANGING AMOUNT OF MONEY. HOWEVER, IF WE HAVE 10,000 SHARES OF THAT SAME $5 STOCK, AND THE STOCK PRICE DOUBLES, NOW OUR INVESTMENT OF $50,000 HAS DOUBLE TO $100,000. TO ALMOST ALL OF US, THIS WOULD BE A LIFE-CHANGING AMOUNT OF MONEY. THE SAME STOCK, SAME STOCK PRICE, SAME STOCK PRICE INCREASE, BUT DRAMATICALLY DIFFERENT IMPACT ON ONE’S LIFE. ALL OF THIS DUE TO TO THE INITIAL, OR CUMULATIVE, TOTAL DOLLAR AMOUNT INVESTED.

The lesson seems to be that our earliest work to earn money (in order to invest), our earliest attempts to reduce debt and taxes (and to use these savings to invest), and our earliest buying and holding of quality investments, are by far the most important effects for our long-term financial wealth. Charles Tadros, M.D.Continue reading “ISN’T THE PSYCHOLOGY AND MATH OF MONEY AMAZING? IF WE HAVE A SINGLE SHARE OF A $5 STOCK AND THE PRICE RISES TO $10 (ie a 100% increase, or doubling your money), TO ALMOST ALL IF US, THIS IS NOT A LIFE-CHANGING AMOUNT OF MONEY. HOWEVER, IF WE HAVE 10,000 SHARES OF THAT SAME $5 STOCK, AND THE STOCK PRICE DOUBLES, NOW OUR INVESTMENT OF $50,000 HAS DOUBLE TO $100,000. TO ALMOST ALL OF US, THIS WOULD BE A LIFE-CHANGING AMOUNT OF MONEY. THE SAME STOCK, SAME STOCK PRICE, SAME STOCK PRICE INCREASE, BUT DRAMATICALLY DIFFERENT IMPACT ON ONE’S LIFE. ALL OF THIS DUE TO TO THE INITIAL, OR CUMULATIVE, TOTAL DOLLAR AMOUNT INVESTED.”