time and money, compounding interest

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I’m a runner by nature. A competitive runner. When I run my favourite race, the marathon, I run against time. There may be ten thousand other runners in the race, but my true opponent is time. If I can finish the course in five minutes less than the year before, I consider myself a winner. But time is a tough contender; he makes no concessions, gives me no breaks, and more and more often these days I have to acknowledge that time has got the better of me.​

In the other side of my life, as a financial planner, the tables are turned. There, time is on my side. Because time is what makes money for me, and for my clients. Plan your finances sensibly, and you can be sure that time will be your slave, multiplying your money day and night, year after year, helping to keep you and family safe and secure. Yes, time is a great money maker.​

But so few people seem to recognize this. They know what they ought to do. They know they should take control of their finances and plan for the future, but somehow that simple task keeps getting postponed. It’s understandable while you’re young, with student loans to be paid back, the world of work to be conquered, perhaps a young family to care for and not all that much spare cash to work with. But the years slip past, and many people find themselves in their 40s and 50s with nothing, absolutely nothing, to support themselves in their older years.​

They have missed the opportunity to get time on their side and put it to work. Establish an RRSP at age 25  invest $100 a month for 40 years, and when you’re ready to retire at 65 you will have a lump sum over $462,000. (That’s assuming an average return over the years of 8 per cent, and a 3 per cent annual rise in the Consumer Price Index (CPI) If you were so lucky as to enjoy an average return of 10 per cent, with CPI the same, your money would grow to over $758,000.)​

How should you get started? First, you should figure out where you stand. For a couple of months take notes of your income and your expenditures. If more than a third of your income is going to debt payments, you’re in no position to think of investing. First, do everything you can to clear the debt. Debt is a terrible problem for many Canadian families. If it’s credit card debt, you are paying around 18 per cent just to maintain the debt. It’s a crippling burden that should be avoided at all costs.​

Once debt is under control, you’re in a position to start planning your future. A financial planner will be able to help you in many ways — reducing tax, using insurance to provide security, accumulating money for a house purchase and children’s education, eventually building up funds for your retirement years. But the process has to start with you — with a determination to achieve financial security, and to do it — not tomorrow, not sometime soon, but today.​

Time is of the essence. But is time working for you, or against you?​

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