In many ways, I’ve been financially lucky. Thanks to my Dad and a combination of personal finance books, I learned the benefits of compound interest before I even had a high school diploma. I knew the benefits of saving a percentage of my income, doing so with the money earned from my very first job at Dairy Queen. I was lucky to have figured this out early in life.
Figuring out all the math behind getting ahead financially is only half the battle. The other half is actually doing what you’ve been taught. As we can all attest, many a financial journey hasn’t been started due to procrastination, laziness or a bunch of other excuses. Bummer.
What’s the point? Well, not that I really have to explain it to you, practicing a little delayed gratification can make you rich. If you can find a way to avoid many little luxuries during your working years, that money can be added to savings. And the more money you can add to savings, the greater your nest egg will be. Sure, returns matter on your investment. But the amount you actually invest matters so much more.
There’s a lot of talk in the PF world about stuff like the latte factor, which is a metaphor for eliminating a bunch of little things, because the little things add up. Or, if you really want to supercharge your savings, you can focus on the big things instead.
Case in point: my parents. Check out the car my Dad has driven for the last 11 years.
Check out that bad boy!
My Dad’s car is so old, it was literally built before I was born. All those spots on it that look like rust? That’s because they’re actually rust. The roof leaked whenever it rained, meaning my ass got wet plenty of times. If you locked any of the doors, they would stay locked forever, since the unlock mechanism was busted. The car cost my Dad $720 years ago at an auction sale.
(Aside: it turns out dad actually made money on his car, since they gave him $1,000 for it as a trade-in. How many people reading this can say they actually made money on their car?)
You’re probably thinking the car was a money pit, costing my Dad thousands of dollars in repairs over the life of ownership. Hardly. In fact, over the last 5 years, he’s spent less than $5,000 on repairs. That’s not per year. That’s a total amount. Add in a minuscule insurance cost, and I guarantee his car cost less money to operate than yours, even though my Dad’s car got pretty crappy mileage.
A couple of weeks ago, his car really started to suffer. A few things started to go wrong at once, and even though old cars cost next to nothing to repair, he was looking at a couple thousand bucks in repairs. So he went to the dealership and decided to buy this bad boy:
That is a brand new, 2o12 Chevy Equinox. It wasn’t financed, or leased, or anything like that. My Dad cut a cheque, and it was done.
And that is why he’s wealthier than you. Because he knows that every decision he makes has an effect on the amount of wealth he’ll be able to accumulate. The longer he delayed gratification, the wealthier ended up being. It’s just that simple.