Does everyone remember the first time they were introduced to the idea of compounding interest? When I left Telluride in 2001 I realized I did not know the first thing about personal finance and I was slightly traumatized about that. I went to the Durham County library and checked out a smallish stack of books from the personal finance section - I probably had 6-8 books, including "Your Money or Your Life", and a few of those Dummies versions.
Anyway, they were all set up the same way, chapters devoted to IRAs, 401ks, and all the categories of your life expenditures: car, insurance, food, etc... What I found as I read all the books was there were some consistent do's and don'ts that each book echoed - those were the lessons I took away from this venture. I figured that if each author had the same advice about a certain topic, there must be some truth to them. So far that has proved to be valuable.
One of the biggest concepts that each book tried to drive home is the idea of compounding interest. It seems always to be introduced with an ominous tone, and it even happened when the 401k guy gave a little talk at work this December:
"Does everyone here know what (dun dun dunnnn) compunding interest is?"
Weak raising of timid hands, perhaps even just one finger here and there.
"I want to show you how much money you would have when you turn 117 if you had put 3 cents into a retirement fund the first time you parents kissed."
Entire room slumps. I start to fantasize about dinner. The only 22-year-old in the room pulls out a calculator, starts punching in numbers and scribbling enthusiastically on a memo pad.
Do you see what I mean? If that is so important, and if everyone knows about and understands the glories of compounding interest, why doesn't every parent start a savings account with $10 when their kids are born and say, "Here's your crib and your IRA - you can thank me later"?
But that's not what this is all about - what I am really thinking about is what motivates me. For all the things I love to do: skiing, climing mountains, exploring desert canyons, practicing yoga poses... if you don't continually do them, that window of time closes. I can't go back to last ski season and add on any more days than I already skied. This season, even with the snow conditions marginal at best for most of the days I went, I can't start now and somehow magically create 30 days on my pass.
And I have 30 days worth of memories, time spent with JC and the kids, good turns, bad turns, cold fingers, spilled hot chocolate, glory runs, all that adds up to us creating memories. And the wider range of memories you create, the richer your compounding interest in life is.
So when it comes to making decisions about whether to ski or not, whether to do one more fun, whether to try one more yoga pose (or the same one again), the answer usually finds its way to YES.
I don't have a trust fund, and maybe I was 15 years to0 late in learning about personal finance to make some smart, long-lasting decisions, but what I do have is a treasure chest of memories. And we just keep adding to them, one day at a time.
You can't go back in time and do more of something or do something differently once that time has passed. And with the exception of creating
No comments:
Post a Comment