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I DON’T MAKE TOO many New Year’s resolutions anymore. At age 70, it seems like most of the good ones are for people much younger than me—especially the ones that involve money.
That said, I did have a good New Year’s resolution involving money for the past few years. It was to wait until age 70 to claim Social Security. In return for my delay, I was rewarded with a far bigger check.
If I were a young fellow again, I’d make a New Year’s resolution to invest some money in a low-cost, broad-based stock index fund. The next year, I would make a resolution to not touch the money. In fact, I’d make that same resolution every year until I retired.
Think about all the money you would earn by waiting many decades before you withdrew the money. Your investment would generate earnings that are reinvested and those reinvested earnings would then generate their own earnings. Your money would grow exponentially over time. It’s called compounding. But I like to call it waiting—because you have to wait a long time to truly reap the benefits of compounding.
Now, that resolution won’t work as well for me because of my age. The waiting period isn’t long enough for me to take full advantage of compounding. That’s why it’s better to start early.
Another key word is patience. Have the patience to wait many years before you touch the money you invested—just like I had the patience to wait for a larger Social Security check.
If you’re looking for a good New Year’s resolution involving money, it often involves waiting and being patient. Those are two great ways to behave when managing money.
Dennis, your points about the virtues of starting early and having patience are all excellent. As for Social Security, I likewise delayed till age 70 and am expecting my first direct deposit next month—definitely worth the wait.