You never really hear people talk about FOMO as it relates to their savings accounts, but you know what? I think more people, especially millennials, should.
Sure, you can be afraid that you’ll miss out on going to that third musical festival this year, or that all of your friends have been to Thailand and you haven’t, but here’s what’s even scarier to me.
Not taking advantage of the only time I’ll ever have the power of 35 to 40 years of compound interest on my side.
Let’s say I want to retire at the classic retirement age of 65. I’m 26 now, which gives me 39 years until that date. Every dollar I save today will have 39 years to grow thanks to compound interest, and if you assume a 7% interest rate, each dollar will turn into $15 by then.
That’s why I’m committed to getting significantly more frugal now. It’s by far the easiest way for me to reach my retirement goals, but it’s also a huge support towards the juggling act of financial goals that is being in your 20s. Sure, this is the most crucial time for retirement savings, but it’s also the lead-up to having kids someday, and maybe buying a house. Both of those things require money, too.
All of this is to say that after running the numbers, I know that my biggest goals (retiring someday, buying a house and having kids) all require some pretty hefty savings, and there’s never going to be a better time to maximize how much I save – especially since my only dependent is our freeloader roommate, Jacob the Dog.
So that’s why I’ve set myself the challenge of saving 50% of my take-home income. The bulk of it will be put into my retirement accounts, but I’ll also be putting money towards three of my other major savings goals: an emergency fund of six months’ living expenses for me, a down payment for a house, and an emergency fund for Jacob the Dog.
I’ll be getting into much more detail about all of this in future posts, so stay tuned! I’ll also be doing month-by-month breakdowns of how it’s going, right down to the penny.
Smart! Compound interest is an amazing tool that everyone should be taking advantage of. I look forward to reading future posts!
Nice. I’d love to hear about your journey! I also need some tips on using that compound interest for myself 🙂 Bout to get serious about my finances!
That’s so awesome! One of my favourite ways to remind myself that saving is so, so worth it is to use simple compound interest calculators to see what my savings will end up looking like down the road. It’s super inspiring (and only a little addictive, haha.) Here’s one to try out if you haven’t used them before!
Oh, yay! Thanks for the link. I’m gonna play around with it. See, I missed saving like I should have in my 20’s 🙁 Sad day. But, it’s never to late to start!
Thanks for doing this blog – it is so important to focus on finances and I think FOMO in regards to money is a good fear to have…! 🙂
It’s a great thing you’re doing this in your twenties. I’m in my early thirties and of course I’m often muttering, “if I only started sooner.” You’ll be way ahead of the game and happy about it when you’re financing your future goals with cash. Can’t wait to read more about your journey:)
Thanks Latoya! And right back at you – I love your blog!
I totally have financial FOMO all the time! Anytime I hear of someone younger than me who has saved since they were 22 I get jealous – and I’m only 27!! Kudos to you for starting this challenge and great blog name btw!
Thank you! It’s funny, after this post it was like… a looooong time until I finally hit that 50% number! So there was definitely a season of “oh my god why did I go with this name, WHY.” But in the end it’s a good stretch goal to have, haha. And great motivation when it comes to negotiation time!