Thursday, February 20, 2014

Delayed Gratification and Compound Interest

Compound interest came up at work as a coworker suggested I max out my 401(k). I already put in quite a bit, and I have other savings, yet the truth is, compound interest is pretty amazing. I am spending a lot, in cash, to go on a vacation to Asia this spring. That is more possible because I spent over three years saving for it.

The point is, go after it. Your big goals, whatever they are, work towards them now, because to bring all the details together in three years will take making steps today. The farther away the goal, the more compound interest may make a difference. If you want to retire some day, money you stock away in your 20s maybe double, tripple, or even quadruple! (A parallel to this is climate change, doing something now would be minor compared to what we may have to do in 50 or 100 years.)

Furthermore, I find that there is pleasure in the pursuit. I mean, by striving for a high goal, and passing up all the simple short term pleasures, like cable television, is a rewarding process, in part because it is exciting to watch the monetary savings grow. It is often hard to see the produce of one's labor, but saving money is abaout as simple and clear as it gets. Seeing that you are actually making progress towards the goal is a reward in itself. I suppose that is the idea behind process oriented.

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