This post was written by Cern Basher, CFA of Brilliant Advice on June 8, 2016 as a gift to our clients and readers, Mr. Basher retains all rights to this post.
Why did you move to the United States? Was it for work? Was it for love? Was it to get away from some danger in your life? Was it for freedom of religion or expression? Was it to give your children a stronger education and more opportunity? Whatever your specific reason, the desired result is the same – a better life for you and your family.
Part of the allure of the United States is something called “The American Dream.” The American Dream can be defined as “the ideal that everyone should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative.” This ideal is our national ethos.
The best thing about The American Dream is that you get to decide what “success and prosperity” mean to you. Many Americans aren’t shy about showing off the success they’ve had by living in big homes, driving expensive cars, and spending lots of money. There are also many Americans who choose to live more modestly but are no less successful or prosperous than their flashier counterparts.
So, what does success and prosperity mean to you?
Success is defined as “the accomplishment of an aim or purpose.” You may consider yourself quite successful for just being here in the United States, and for many that is quite an accomplishment. For those of you who made a difficult journey to get here, I applaud you. You have already shown that anything is possible.
Prosperity is defined as “flourishing financially.” Ah, now we come to the money.
Success and prosperity are obviously about more than just money, but there is no denying that money is part of both. And while I can’t give you a guide to your personal success and prosperity, I can share one very important “secret” to achieving it:
You can achieve prosperity in your life no matter how much money you make – if you save and invest.
It’s that simple. No matter how little you make, the secret to prosperity is to save and invest some of your money. Your future self will thank you for it!
The key part of saving and investing is to get started early. The sooner you begin the less money you will need to save and the more money you will have. The longer you delay, the more you will need to save to have the same amount of money in the future.
Consider Maria and Daniel who both moved to the United States to pursue The American Dream. Maria immediately begins to save $10,000 per year in an investment account. Then after 10 years, she stops saving. Daniel, on the other hand, waits 10 years before getting started. He then invests $10,000 per year for the next 10 years before stopping. Assuming they both earn 6% per year, who is better off?
This is a hypothetical example of mathematical compounding. It’s used for comparison purposes only and is not intended to represent the past or future performance of any investment. Taxes and investment costs were not considered in this example. The results are not a guarantee of performance or specific investment advice. The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for high returns also carry a high degree of risk. Actual returns will fluctuate.
In this example, Maria will have almost twice as much money as Daniel after 20 years, even though they both initially invested $100,000. Her balance is higher because she gave the investment returns twice as much time to compound. For Daniel to have as much money as Maria at the end of 20 years, he would have to save almost $18,000 per year.
The promise of The American Dream is very powerful. But if you don’t begin to save and invest now, it will be that much harder to attain. So don’t cheat yourself out of The American Dream. After all, isn’t that why you’re here?
Cern Basher, CFA is the President and Chief Investment Officer of Brilliant Advice, a firm designed to help you imagine, create, and live your ideal life. For more information, visit www.brilliantadvice.net.
Cern Basher, CFA, Brilliant Advice