I am a huge fan of the exponential function. It is simply magic.
This ninth world wonder—as Albert Einstein (or some other clever person) called it—can make everyone a millionaire with merely saving 1$ a day.
That’s a bold statement that is mathematically true:
Ok, I admit that it takes quite some time. 70 years is hard to imagine.
Impatient? What if you would save 2$ a day? No, it would not cut the 70 years into half; you would still need about 61 years. But that is compounding interest and that’s how the exponential function works.
Although it is a bit hard, do think long-term. It is time in the market and not timing the market that makes all the difference. Still, so many “professional” stock traders are trying to find the ideal entry and exit points to squeeze the last drop out of returns.
You, however, are not in a race and do not have to explain to your shareholders every quarter how their investments have performed.
You have a giant advantage over Wall Street. You have the edge and that edge is called time.
Source: Robert Shiller
And yes, you certainly have to watch out for that nasty inflation that wants to eat up your savings. So to have 1 Million by the time you are 70 (assuming your parents started saving for you when your were born), it is mandatory to increase your 1$ a day savings in line with that of the inflation rate. And don’t tell me that that is not possible when your salary also increases.
You have the opportunity to focus on the long term; however, the question is : Will you?
“A jug fills drop by drop.” — Buddha
“Plan for the future, because that is where you are going to spend the rest of your life.” — Mark Twain
“Spend less than you make. Always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer!” — Charlie Munger