Comments on: Rule for Building Wealth: Start Early http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/ A premiere personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Sun, 08 Nov 2009 07:50:42 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Flexo http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73589 Flexo Tue, 12 Dec 2006 14:44:40 +0000 http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73589 Sam: According to <a href="http://en.wikipedia.org/wiki/Butterfly_effect" rel="nofollow">Wikipedia</a>, the principle of the Butterfly Effect is, "Small variations of the initial condition of a dynamical system may produce large variations in the long term behavior of the system." Yes, it's a term generally applied to meteorological theory, but the concept is similar, and there's no reason it can't be applied to other "dynamical systems." Small changes at one point affecting large changes at another point is the basis of the thought. Compounding interest and appreciation may not be the typical application of the term "Butterfly Effect," but it's easy to extrapolate. Sam: According to Wikipedia, the principle of the Butterfly Effect is, “Small variations of the initial condition of a dynamical system may produce large variations in the long term behavior of the system.”

Yes, it’s a term generally applied to meteorological theory, but the concept is similar, and there’s no reason it can’t be applied to other “dynamical systems.” Small changes at one point affecting large changes at another point is the basis of the thought. Compounding interest and appreciation may not be the typical application of the term “Butterfly Effect,” but it’s easy to extrapolate.

]]> By: Sam http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73588 Sam Tue, 12 Dec 2006 14:30:11 +0000 http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73588 That is not a valid example of the butterfly effect. Look it up. That is not a valid example of the butterfly effect. Look it up.

]]> By: Pete http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73582 Pete Tue, 12 Dec 2006 11:28:57 +0000 http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73582 I always thought some of these examples of how to save early to become a millionaire are misleading. I always cringe when I hear you can become a millioniare in 30-40 years, because as you said the value is significantly less in the future (actually $250,000 if you use 3.5% interest in 40 years). Also, when these examples use a fixed contibution for 40 years, it still ignores inflation and wage growth. I love the example of if you contributed $2,000 in your early twenties and are 65 today, you could have been a millionaire. Unfortunately, $2,000 a whole lot more money 40 years ago then it is today. If these examples where realistic, the contribution should be adjusted for inflation as well (and the results would be a whole lot different). I have writting up a few examples at: http://www.myfinancialawareness.com/Topics%20Financial/Myth%20-%20Don%27t%20Wait%20Save%20Early.htm I always thought some of these examples of how to save early to become a millionaire are misleading. I always cringe when I hear you can become a millioniare in 30-40 years, because as you said the value is significantly less in the future (actually $250,000 if you use 3.5% interest in 40 years).

Also, when these examples use a fixed contibution for 40 years, it still ignores inflation and wage growth. I love the example of if you contributed $2,000 in your early twenties and are 65 today, you could have been a millionaire. Unfortunately, $2,000 a whole lot more money 40 years ago then it is today. If these examples where realistic, the contribution should be adjusted for inflation as well (and the results would be a whole lot different).

I have writting up a few examples at:
http://www.myfinancialawareness.com/Topics%20Financial/Myth%20-%20Don%27t%20Wait%20Save%20Early.htm

]]> By: Saving U From Credit Cards http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73501 Saving U From Credit Cards Mon, 11 Dec 2006 21:23:25 +0000 http://www.consumerismcommentary.com/2006/12/11/rule-for-building-wealth-start-early/#comment-73501 Starting an investment plan early on was a key to my own personal wealth building. I started at age 23, investing only $25 biweekly. I had $25 deducted from my check every payday. I never missed the $25 and it was fun to see my investment statement at the end of the year. I put in $650 over the course of the year and by the end of my first year of investing that $650 magically turned into $1500. As every year has rolled by the compound interest effect has kicked in (I am now 37) and that measly amount invested every month has skyrocketed into much more - I am on track to be truly financially free by age 45. I do advise any "newbie investors" patience is a key to succeeding with investing. Here is a brief story of a case where I jumped out too early: I was holding a tech stock that plummeted to around $1/share and that was down from close to $100/share. When the tech stock rose to $4/share I dumped my entire holdings. That's the wrong time to dump shares. The company was still showing some solid reports but I let emotion rule and got out way too early. That stock recently hit $40/share. Had I continued investing in that very same stock at the rate I once was I could have had $800,000 right now. Remember patience, remove emotion and some basic knowledge of reading annual reports etc. will build wealth with minimal investing. Starting an investment plan early on was a key to my own personal wealth building.

I started at age 23, investing only $25 biweekly. I had $25 deducted from my check every payday. I never missed the $25 and it was fun to see my investment statement at the end of the year.

I put in $650 over the course of the year and by the end of my first year of investing that $650 magically turned into $1500.

As every year has rolled by the compound interest effect has kicked in (I am now 37) and that measly amount invested every month has skyrocketed into much more – I am on track to be truly financially free by age 45.

I do advise any “newbie investors” patience is a key to succeeding with investing.

Here is a brief story of a case where I jumped out too early:

I was holding a tech stock that plummeted to around $1/share and that was down from close to $100/share.

When the tech stock rose to $4/share I dumped my entire holdings.

That’s the wrong time to dump shares. The company was still showing some solid reports but I let emotion rule and got out way too early.
That stock recently hit $40/share. Had I continued investing in that very same stock at the rate I once was I could have had $800,000 right now.

Remember patience, remove emotion and some basic knowledge of reading annual reports etc. will build wealth with minimal investing.

]]>