Making Long Term Goals Like Investing for Retirement Easier to Understand

by David Ning · 7 comments

Hindsight is 20… Okay, we know that saying so let’s skip the crap. Today is the last day of the year decade. Is there anything you wish you did this decade that you didn’t? If you could turn back time, how will your goals be different?

I read somewhere before that most of us overestimate our short term goals but severely underestimate what we can achieve long term (long term being five years or more).

Today marks the end of another decade. If you could restart year 2000, is there anything significant that you could have done to make your life a little better in 2010?

Sometimes when I talk about long term money matters like retirement and long term investing, I bet many of you are finding the concepts quite hard to grasp. 10, 20, 30 years into the future? Who can make a commitment for that long?

Make a commitment now

I know it’s hard, but yet, those of us who made sacrifices in 2000 are SO MUCH better off now. It’s no secret that the last decade for the stock market down right sucked, but did you know that:

  • The S&P 500 actually had a negative annualized return in the past 10 years, but having $100,000 at the start of 2000 in a S&P 500 index fund and putting $1,000 a month towards it still gave you $214,000?
  • If you had a diversified 80% stock / 20% bond portfolio rebalanced annually, it equaled to an annualized return of just 3.6%. Yet, with the same $100,000, your portfolio could have been $290,000 with the same $1,000 monthly contribution.

(Data: Jan/Feb Issue of Money Magazine)

$190,000 extra since 2000 in the worst investing environment since the great depression isn’t bad at all, and amount is certainly much more money than most people have. Yet, all of us could have had that much money by now.

If only we made that commitment, instead of buying all that stuff we can’t even remember now.

If $1,000 is too much, then start with less and increase it slowly. The more you save, the more you will have. It sounds obvious, because it’s hard to imagine results so far away. Instead, think backwards. Venturing out ten years into the future might be tough, but what if you look back and tried to see yourself making that commitment ten years ago? All of a sudden, the goal isn’t so far fetched.

A decade is a long time, but we already have a couple of those under our belts and will live many more. Find some long term goals and stick to it. Not just because it’s the right thing to do, but because you absolutely need to. If you need some help, your past could help.

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{ 7 comments… read them below or add one }

Matt S December 31, 2009 at 6:21 am

And, it’s important to point out, that if the market turns, you have been buying more when the prices are inexpensive.
No one bitches about getting a bargain. Only time will tell if this is a bear market, or the biggest bargain market.

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MoneyNing December 31, 2009 at 9:05 am

I believe most people can never sell low and buy high, so it’s probably best to just put money into the market periodically no matter what the price is.

Then again, if you ended up saving more because you diligently invested when it was going down, that’s not a bad thing either.

$100 saved and invested to become $50 is still more than $0 saved.

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marci December 31, 2009 at 8:59 am

Only thing I’d have done differently is to spend more time with family and friends :) Nothing to do with money – except maybe taking more time OFF work :)

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Cd Phi December 31, 2009 at 9:30 am

If I could turn back time, I would definitely have spent my time more wisely and my money as well. Maybe if I had read financial blogs ten years earlier, I would be a little richer as well.

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John DeFlumeri Jr December 31, 2009 at 1:35 pm

Wish I had never put any money in the stock market, well live and learn, it’s just a form of gambling.

John DeFlumeri Jr

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Mark December 31, 2009 at 2:11 pm

I’ve subscribed to this way of regular investing since I started my new job in November 2000.

It got me a return of 8.58% for the decade. I’ll definitely take that.

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JB January 5, 2010 at 4:38 pm

I would have invested in Apple lol…

No honestly the first thing my parents did when i got out of college was buy me some finance books. These have helped more than anything to automate my savings. And since my younger brother just ventured forth into the world of working I’ve followed the tradition and purchased him some finance books.

Highly recommended for anyone straight out of college with some dollars in their pockets…

I guess if I had to change something i would have strived to be more of an entrepreneur while in college since i had much more free time than i do now to take those risks.

David, I can’t wait till you post this question in 2020 to see where you’ve helped me get. Thanks for all the advice, it keeps my honest.

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