A few months ago a coworker and I got talking about our company’s retirement plan and I could tell he needed some help understanding some of the fundamentals. So the next day I lent him a copy of one of one of my favorite books on finance in hopes that it would help him to manage his money better. However a few months later when I checked in with him he said he still had not read the book because he hadn’t found the time for it.
“I don’t have time for that” – It’s one of the biggest illusions we fool ourselves into believing. We say it about exercising more, going back and getting that degree, spending more time with the people that matter, etc. Yet for many of us I’m willing to bet that if you really did an audit of what actually do with our time, we could be investing it into something that’s a whole lot more beneficial than what we’re doing no.
I truly believe this is absolutely true when it comes to your finances. There are TONS of great resources out there ready to teach you how to manage money wisely and build your wealth.
Investing in your own personal finance education is one of the best things you can do to improve your life and the lives of your family members.
Most of what you need to get started is practically no further away than your keyboard or the local bookstore.
Yet for some reason this one initiative never seems to rank very highly as a priority for some people … that is until you can show them what they’re missing. Let’s quantify how investing in my own financial competency has paid off.
What is the Value of a Financial Education?
Starting Off on the Wrong Foot:
I remember being a young professional with barely a clue about retirement when I first told by HR to sign up for my 401k account. Without knowing anything about it I asked the guy next me how much he was going to contribute and we both decided (based on absolutely nothing) that 8% sounded good.
“Retirement feels so far away …” I thought. “I’ll just contribute more as I get older and make more money. Don’t I need the money NOW more badly?”
Unfortunately this is exactly where financial planning starts and ends for a lot of people. They are told by their company to fill out their retirement plan forms and then they don’t change anything about it for the next 10-20 years. They never make any financial goals, check on their performance to see if they are reaching those goals, or make changes as necessary to stay the course. They use the head-in-the-sand approach and never really give it another thought.
Thankfully I realized early on that this was a BIG deal. It wasn’t long after I started my 401k plan that I started to figure out that the conventional system of creating wealth by being a slave to your employer in hopes for a bigger paycheck was for suckers. If you study how ordinary people become millionaires over time, you’ll find that there’s something to it all. I could tell that this 401k thing was going to be a big part of it.
Using Money Books to Grow My 401k:
And so with that I decided to hit the local bookstore to take in everything I could about how to manage your finances the right way. Before me were rows and rows of books from self-made millionaires and entrepreneurs. Each book was a like a personal one-on-one conversation where they were going to spill their secrets to me.
The only question – would I listen? Would I actually take the time to read what they had written and actually give it a shot.
One book in particular called “Your Money Ratios” by Charles Farrell really helped me to understand not just my 401k but structuring an overall retirement using several different tactics. If you’ve never read it or just getting started with retirement planning I’d highly recommend you check it out.
10 years and lots of books/websites later I’m proud to report that my 401k balance has outpaced all of my peers at work. There was nothing mind-blowing about what I did to get there. I simply put in the time to learn more about:
- The value of maximizing my contributions
- Diversifying my asset allocation
- Taking advantage of tax deferment
- Getting my full employer match (free money)!
To date my personal contributions to the plan are at $127,249.
But what is my balance? Checking my free Personal Capital account I see that my 401k is all the way up to $340,816!
That’s a whopping 168% return on my effort!
Keep in mind that the $341K figure is both my investment returns and employer matching contributions. I’m counting both as part of the return because hadn’t spent some time learning about my 401k and just simply hid my $127K under my mattress, I would have missed out on all the money my employer was offering to match.
The Beauty of Compound Returns:
Another thing learning more about money taught me – time is your friend! The more you invest now, the better your potential returns look in the future.
Let’s say I do absolutely nothing but let the money sit idle in the account for the next few decades. If we use the rule of 72 and an 8% return, that means every 72 / 8 = 9 years I should expect my fortune to potently double! Check out the possibilities:
And to think … all I did was read a few good books and follow their advice. I’d say that was well worth my time.
Advice on How to Manage Money Wisely is Out There:
Don’t have a 401k? It doesn’t matter. This same logic applies to practically every aspect helping you master your finances. There are plenty of good websites and books about:
- Getting out of debt
- Doing a better job saving your money
- Building up your credit
- (And my favorite) developing passive income streams
What does it require from you? Usually nothing more than about $20 for a new book (or free if it comes from the library or Internet) and the DESIRE to actually want to make a change in your life. If you want to learn how to manage money wisely and escape the rat-race bad enough, then you’ll find a way to make it work. You’ll find the right advice and tips to get you there. And at some point you’ll look back on your efforts and say – that was definitely worth my time.
Readers – What do you do to learn how to handle your money better? How do you value financial education and can you quantify what kind of an impact it’s made on your life?
Image courtesy of FreeDigitalPhotos.net