Cost of Delay

Procrastination means postponing what one is suppose to do now to another time. It’s a human nature to procrastinate.

People do realize the importance of investments but it is not a priority for them in the early stages of their career. We delay making investments as we think that we can always make up for the lost time once we start to earn more and thereby investing a higher amount.

If a person of age 60 start thinking about getting rich, it is unlikely he may succeed. If a person start thinking in 30’s or 40’s, there is a good chance he may succeed. But if a teenager starts thinking about getting rich, there is all probability that he will succeed, but why? It is because the teenager has the time in his side. Time is the single most important factor that stands between you and wealth.

Warren Buffett once said “I made my first investment at the age of 11, and I was wasting my time until then.” The thing is when we have time on our side, we mostly don’t value it.

In this consumption based economy, where we first fulfill our most exotic demands, that too by just clicking few buttons, and only delay our investment decisions.

However, making up for lost years in pce san diego investment is not easy, as the cost of delaying is enormous. Even one year makes a huge difference.

The costs of procrastination are more severe than we consciously understand, may be more expensive than all other costs combined. One reason is these costs are often silent and out of sight.

One may be tempted to think that cost of delay by one year will be losing the first year’s return only, but actually it will be the last year’s return.

Table_1: Annual Earning of Lump-sum & Systematic Investment at 12% CAGR

As in Table_1, if a 20 year old, makes a onetime investment of Rs. 5,000 and earns 12% p.a. return, then on retiring at 65, the total corpus will be Rs. 8,19,938/-, provided the money is untouched for 45 years.

If he does the same at the age of 21, his total corpus will be Rs, 7,32,087/- when he retires at the age of 65. The cost of delay in one year of investing is Rs. 87,850/- i.e. the last year’s return and not Rs. 600/- the first year’s return.

This difference become more enormous, when the investment of Rs. 5,000/- is done regularly i.e. annually. The retirement corpus will be short of Rs. 8,19,938/-. That is a steep price one has to pay for a single year of procrastination.

So to make the compounding work for us, we got to start early. The next best thing to start early is starting now. We also need to remain disciplined and make regular investments.

Compounding will only work if we allow our investment to grow. The results will seem slow and small at first as most of the magic of compounding returns comes at the very end.

Be patient…