If you want to become active in the stock market, you should start as early as possible, advises Suze Orman. In an example calculation, the financial expert makes it clear how much money investors miss out on if they invest late in the stock market.
• Suze Orman believes young people don’t understand the concept of “compound interest.”
• Early provision for old age brings optimal financial success
• Further savings tips from the expert
The American Suze Orman is a financial advisor and presenter as well as a best-selling author. Her core topic is “personal finance” and she is considered a guru in this area. As part of an interview with the “Wall Street Journal”, the financial expert spoke about the biggest mistake that young investors in particular are subject to.
The key concept of money
Many people in their 20s are missing out on hundreds of thousands of dollars in retirement savings because they “don’t understand the power of compound interest,” Orman told the WSJ. Specifically, the expert refers to the attitude of many young people for whom retirement age is still so far away that they are postponing their retirement planning measures until a later date when they are in a better financial position. But in their opinion, making up for the time missed is expensive and has consequences.
“She [junge Menschen] “Don’t understand the value of compounding and don’t know that the key to their financial independence is their age,” says Orman. In her opinion, building up retirement savings is crucial. People underestimate how much money they will have to invest later To catch up on the missed backlog or how much money is needed in total to retire, one could be forced to work longer than desired. In some cases it could be that “you will never be able to retire,” paints the Best-selling author paints a bleak picture.
Example calculation makes the argument clear
During the interview, Orman calculates how strong the connection is between an early investment in the stock market and the actual input for retirement planning at the end.
“Let’s say you’re 25 years old and you invest $100 every month for 12 months and every year in a Standard & Poor’s 500 index fund through a Roth IRA until you’re 65. It’s very likely that You will receive an average annual return of 12% over 40 years,” according to their calculation. “At the end of these years, you’ll have $1 million,” Orman continued. But if you wait ten years and don’t start investing in the market until you’re 35, you’ll only have $300,000 by the time you’re 65. “[Junge Leute] don’t understand that,” Orman continued.
More financial tips for young people
In the interview, the expert also has a tip on how you can save money in everyday life. The 72-year-old emphasized that she would avoid going out to eat and instead enjoy her meals in her own four walls. “I refuse to eat out,” she explained. “I think eating out is one of the biggest wastes of money on any level.”
Orman not only limits this assessment to meals outside the home, but also declares war on the ever-popular “coffee to go”. She doesn’t buy the one cup of coffee she drinks a day at Starbucks & Co.: “I would drop dead before I bought a coffee.”
Annual goals are like diets
Although Orman saves on eating out and advises investing money as early as possible, she doesn’t want her advice to be taken as restrictions. “If you’re always limiting yourself, limiting yourself, cutting back, not buying this, not buying that, then at some point you’ll explode and go out and buy everything at once,” she explains. Against this background, the author doesn’t believe in New Year’s resolutions. When it comes to finances, these are just as distasteful to her as crash diets.
Editorial team finanzen.net
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