You’ve heard this advice over and over again. Paying yourself first from an early age is the best, and easiest, way to accumulate wealth. However, when we saw this information on a couple of graphs over at Sweating the Big Stuff, the point really hit home. Take a look:

Alex is 25 and saves $5,000 a year for 10 years, and after 10 years, has a cool $73,000 in his bank account from his $50,000 in contributions. Then he doesn’t contribute another cent until retirement.
Graph.

John is 25 but decides that he’ll be able to make up the difference later. he waits 10 years, then contributes $5,000 a year for the next 30 years, for a total of $150,000 in contributions.

Who do you think has more money at age 65?

Despite contributing 3 times as much as Alex, John has about $55,000 less at retirement, assuming a 7% return on investment.

And what if Alex hadn’t stopped saving at 35? What if he continued to invest $5,000 a year for the next 30 years? He’d actually end up with over twice as much as John by the time both men turned 65.

Seeing graphs like this really puts things into perspective, doesn’t it? It’s an incredibly simple concept, but paying yourself first can truly make you richer, with few contributions and fuss over time.

Read more over at Sweating the Big Stuff.

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