Whats your cost if delay investing

Some of us put off financial planning, postpone retirement savings or delay pay off escalating debts.  These eventually translate into a bigger financial loss. To eradicate this habit, learn how time determine the value of money.

• The power of compounding. When money works for us, it grows in value or compound, earning interest on interest and it is one of the greatest aspect of financial planning. 
• The cost of procrastination. If your goal is to raise RM100,000 by age 65,  compounding at an annual rate of 10%, your current annual saving (assuming you are 20 year old now), RM1,132. However if you only start your savings at age 50, your annual saving will be RM22,500.
• Inflation factor. The price of goods and services increases over a period of time. Thus a dollar tomorrow will not buy as much as today's dollar.
• Other lost opportunities. We can be adversely affected financially if we put off other important financial matters like life assurance, retirement plannning, estate planning or even basic financial planning.  Eg the insurance period of a 45 year old is much higher than than for a 20 year old for the same coverage.

Delaying manging our money may result in lesser in value compared to investing now.  

"Compounding" your gains

There's only one investment technique that's mathematically certain to build fortunes from small starting positions. It is a sure technique  thant anyone can do –  called  compounding.
You invest your money in something that pays you a return in the form of dividends, interest, or profits. Then you reinvest your dividend or interest income back into the investment.  Now your dividends are earning dividends and your interest is earning interest. You are "compounding" your gains by reinvesting your profits.  A snowball is the best analogy for compounding. When you first roll the ball in the snow, it gains mass slowly. But as the surface area increases, it picks up more snow. Suddenly the ball is so heavy you can't move it anymore.

Time is the most important ingredient in compounding. The more years you give it, the more your money mushrooms. Here's how it works… Let's say at age 40, you invest RM5,000 at 8% and reinvest the income. At age 65 you'll have RM34,000. If you'd made the same investment at age 20, you'd have RM160,000 by the time you turn 65.

To make the most of compounding, you should make regular payments. If you'd invested RM5,000 every year at 8%, starting at age 20 and reinvested the income, you'd have almost RM2 million by age 65.