The Right Time to Start Saving is Right Now

by JBS Financial 3:50 am 27 Jun 2017

Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Who are we to argue?


Compound interest is when interest is earning interest not just the original capital. I.e. you invest $100 at an interest rate of 5%. After year one you have $105. After year two however, not only does your original $100 earn another 5% interest, but the extra $5 is also earning 5% interest so that at the end of year 2, the money has grown to $110.25. Yay an extra 25 cents. Where compounding really gets interesting is when you extend it over long periods of time.


Let’s take two examples. Example 1 is a 25 year old who has a decent income and is able to put away $100 a week into an investment that generates 6% p.a.


In the second example, however, the person tends to spend all of their money on fun stuff, living life to the fullest until the age of 45 where they decide to start saving for retirement. They are on quite a bit more income than the first person who is only 25 and instead of being able to save $100 a week, they can save $400 a week.


Person 1 ends up with approximately $861,457 at age 65 after contributing $213,200 over the 40 years.


Person 2 ends up with slightly less at approximately $835,851 at age 65 however they have astoundingly put in $436,800. Over twice as much as person 1. Imagine what person 1 would have been able to do with the extra $224,600 that they didn’t need to contribute over the last 20 years? Me personally, I’m thinking holidays.


While returns are important when investing, the single most important thing that can grow your wealth the most is time. Compound interest makes this possible, and so when is the right time to start saving? No matter how old you are, the right time to start saving is right now.


PS. Compounding also works in reverse when you borrow money. Having to pay interest on interest deteriorates wealth just as quickly as earning interest on interest creates wealth.


– Liam Rutty –

Celebrating Achievements | Andy Lay

by JBS Financial 1:01 am 20 Jun 2017

We all celebrate certain things in our lives. Whether it’s the arrival of a new baby, holiday, weddings, or our first home, the list goes on and on. However do we celebrate enough and do we use these achievements to our advantage? All these events are equally important to the person involved and we’ll be looking into how and why we need to celebrate these successes, once we’ve achieved them.


When we don’t meet our goals, we often put heavy emphasis on what didn’t work and all the negative effects that go with it. So why don’t we do the same thing when we achieve our goals? Once we’ve achieved our goal we would acknowledge it at first but then quickly move on. To give you an example, my wife and I had initially set ourselves a goal of saving enough for our own home several years ago. We initially made a commitment to ensure we had enough savings by the end of 3 years to buy our own home. To make things a bit more difficult, we didn’t want our son to be in child care, which meant my wife wasn’t working and I was the sole income earner. We didn’t let this get in our way and were able to reach our goal by the end of the 3 years. After we purchased our home, we both sat down and reflected on all the hurdles we had overcame and more importantly soaked in the fact that we achieved our goal even with hurdles along the way. This gave us a more positive outlook and motivation for future goals.


So why should we celebrate?
So it’s all great that we celebrate our achievements, but is there an actual reason why we do and will it help us in the future? Here are some important points relating to why we should celebrate success.


1.    To learn and replicate future achievements.
One reason we celebrate is to recognise what is working well and why. Furthermore you can learn and inspire yourself from your past achievements. So in turn means you can replicate your achievements in the future. In my case for example, we agreed that being able to save for a house whilst on 1 income was a huge achievement. However we’ve also reflected on what hurdles we had to overcome and how we can replicate this success in the future. We’ve since achieved smaller goals such as creating an education fund for our kids and next is to save for a new car.


2. Changing your mindset to focus on success
Whatever it is that you want to achieve, having the correct mind set can be difference between success and failure. Having a negative mindset and constantly focusing on hurdles and failures will affect your motivation and ultimately leads to a higher chance of failure.


A large part of success is about your state of mind – so it’s about having a successful mindset. No matter how minor, you need to celebrate all your successes. Put a large focus and emphasise on what you’ve achieved and less on past failures and what hurdles lie ahead. Telling yourself you’ve overcome hurdles before and that you’ve also achieved successes in the past will help build your self-confidence and create a positive outlook. Conversely not recognising your achievements or putting your success down to luck, will not have the same effects on your mindset and motivation.


3. Motivation and Feel Good About it
Motivation is another factor which determines the success and failure of our goals and is also connected to our mindset. In this case motivation comes in the form of us acknowledging all our successes. Not just the big ones but smaller millstones, actions and goals, will give us the extra push along. So always give yourself plenty of reasons to celebrate your successes. That way you continuously build motivation for future goals and accumulate momentum.


One of the best and most important reasons to celebrate your success is simply because it makes you feel good. Because feeling good is what it’s all about isn’t it? It’s the reason why we set off on our goal in the first place. Remember there’s nothing more important than for you to feel good about achieving your successes.


4. Sharing success
Celebrating your success doesn’t always have to be about yourself and your partner. You could also get your relatives and friends involved and join in with the celebrations. Informing your friends and family of a goal you have set can also assist your achieve it, as it will keep you accountable. Back to the example of us purchasing our first home, we initially brought up the topic with our parents and our friends. Although they weren’t going to keep us accountable, at the back of our minds however we really wanted to achieve our goal to prove to everyone that we were capable of reaching our goals despite encountering challenges along the way. At the same time, once we purchased our home, we got all our friends and family together and celebrated our success, which in our minds just spreads the positivity around to everyone.


A final point to remember is you have to recognise your own success if you want other people to as well and how you do it is up to you but just remember to have fun doing it.


– Andy Lay –

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