But wait! THERE’S MORE!

2 seconds.  4 seconds.  1 second.  My coworker, Randy, has noticed an interesting trend around the office.  After he pointed it out, I was surprised (not by the fact that Randy was actually right) by how often I found the same thing.

See, we have two different microwaves on our floor for employees to use to heat up breakfast, lunch, a snack, or coffee that sat around a little too long.  And it’s amazing how often people set the timer and then just can’t wait for the last couple of seconds before they have to pull their newly hot item out of the microwave.  2 seconds?  Really?  You couldn’t wait that long for it to actually be done?!?

clockI guess I shouldn’t really be surprised.  After all, many of us struggle to wait for things.  It just seems to be a part of our culture.  After all, you know the tagline from the commercial – “It’s my money, and I want it NOW.”  It plays so often you might even be able to sing the rest of their jingle.

Is that really a bad thing to live in the moment?  ‘Seize the day’ and all that.

I will agree that there are times you really should take advantage of the moment.  But I will temper that with the argument that we do not take advantage of waiting NEARLY enough.  We struggle to see past right here and now.

Don’t believe me?  Here are some examples:

Let’s say you want a new TV.  Not just a little one you need to be within 10 feet of to see.  No, I’m talking a 65 inch LG.  If you can save up and pay cash, Best Buy will sell you that TV for a considerable $799.99.  That’s no chump change.  It would take the average American some time to save that amount and pay cash.

“But I want it NOW!”

OK, so you head over to the local rent-to-own place.  Small, easy payments over time and you can have that same LG TV (albeit a slightly older model) right now.  They offer two payment plan options.

Plan 1:  You can pay $119.99 a month for the next 24 months.  Now that slightly older TV will end up costing you a total of $2,879.76.  That’s more than THREE TIMES the cost.

Can’t manage to hold on to money long enough to come up with $120 over a month?  That’s OK.

Plan 2:  Now you only have focus on one week at a time and pay a mere $29.99 per week for the next 104 weeks.  First, let’s clarify.  With 52 weeks in a year, 104 weekly payments cover the exact same amount of time as 24 monthly payments.  But when you do the math, you end up paying a total of $3,118.96 for the exact same TV in the exact same amount of time.

Just shy of FOUR TIMES AS MUCH AS A NEWER MODEL AT BEST BUY!  You just have to save up a little first.

So why do we continue to do rent-to-own?  Because “I want it and I want it NOW!”

FOUR TIMES AS MUCH, AMERICA!

All right, I think we’ve covered that topic enough for now.  Let’s move on to another example of the benefits of thinking long term and being willing to wait.

At what age would you like to retire?  Are you planning for that yet?

“But, that’s so far from now!  Why bother, I’ve got plenty of time.  I’m going to enjoy the fruits of my labor now while I’m young and still can.”

Before you spend every last penny of that pay check, here’s some math for you.

Three scenarios:

Scenario 1:  You invest $3,000 a year at 10% return from age 18 to age 22, then do nothing more but let it sit until you are 65.  Total investment – $15,000.

Scenario 2:  You invest $3,000 a year at 10% return from age 28 to age 37, then do nothing more but let it sit until you are 65.  Total Investment – $30,000.

Scenario 3:  You invest $3,000 a year at 10% return from age 38 until you retire at age 65.  Total investment -$84,000.

So which will yield you the most money for retirement?  Surely the one with the most invested, right?

Scenario 3 will net you a total cash value of $442,893 at age 65.  Not bad for an investment of $84,000.

Scenario 2 requires more delayed gratification starting at age 28.  More waiting to enjoy that money, but at age 65 you will have a cash value of $768,451.

Hmmm, that’s interesting.  Almost double.

Scenario 1, which requires the most gratification delay, also allows the most gratification.  With an investment of only $15,000 early on, at age 65 you will have a cash value of $1,213,646.

Oh baby, SEVEN FIGURES!

Sailboat SunsetYour first several years may not have been quite as much fun, but I know I sure would rather have $1.2 million compared to $442,000.  Do you want to retire on a yacht?  Or a shipwreck?

1, 2, or even 5 seconds on a microwave?  Probably not that big of a deal.  But more important is the mindset of not being able to wait when it really does matter.  It’s what we call ‘opportunity cost’.  What is it costing you in the future to make that decision right now?

If you struggle with managing your finances over time, set some goals.  With an eye on the bigger prize down the road, it can provide motivation to manage our money today.

Not sure what to set for goals?  Well, we can help with that.  An important piece that happens in just about every first appointment is the setting of goals.  The counselors at the Center for Financial Resources help people identify goals all the time.  We can even help identify steps towards accomplishing those goals.  It may take some time to get there, but with a plan, you certainly can.

To make an appointment with a CFR counselor, you can schedule online or call us at 605-330-2700.

And now that you’ve read all the way through an argument for waiting, I’m going to tell you NOT to wait to make your appointment.  Your financial future begins today.

 

written by Breck Miller
images courtesy freedigitalphotos.net

 

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