Chill out 20-somethings, your major wealth gains won’t come until your 50’s

I’ve felt an almost crippling sense of urgency to meet major financial milestones in my 20s. Whether I’m buying in to the “adulthood begins at 30″ idea or just simply under stand that now is better than later, I set very high expectations for where my finances should be in my 20’s. And it’s only recently occurred to me how ridiculous that is.

Even though I’ve been saving for tomorrow what I earn today, I never actually thought about tomorrow will look like. 

I’ve blogged before about how you face some of your biggest expenses in your 20’s, and you have to pay for them with what are likely the lowest wages of your lifetime. It seems backwards that the time we need money the most, we have the least of it, but that’s really how it goes.

I’ve been saving for retirement for nearly 4 years, but I have less than $40,000 saved in my RRSPs. I almost maxed my TFSA out once, and then most of it quickly got liquidated to pay for my MBA. I don’t own a house or a car, which means aside from my computer, the most expensive items I own are purses. How’s that for assets?

I’m almost 30 and my networth is still only a few ten thousand dollars.

It’s a little bit frustrating, to see the least. After years of hard work getting rid of my student loan debt and saving & investing, shouldn’t I have more to show for it? Actually, no. Even if I had opted not to go back to school for my MBA, I’d only just be scratching the other side of six-figures by 30. I wouldn’t even be near $250K, let alone approaching millionaire status.

So if years of hard work ultimately only make the difference of a few thousand dollars, what’s the point?

Time. The 40-ish working years ahead of you are your biggest asset in your 20s, not your paycheque. The first reason is the obvious one: the “magic” of compounding. I’ve pointed out in previous posts that $1 saved in your 20s is worth about $7 in your golden years. What that post leaves out is most of the gains actually happen in the last 15 years of your 40 year investment.

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Return on a $1 investment made in your 20’s assuming an average 5% annual return

Crazy right? Your $1 only earns $0.28 in five years of your twenties, but $1.52 in five years of your 60’s (assuming your reinvesting the interest earned in the decades between to maximize the benefit of compounding interest). That means each $1 will grow by 239% in the first 25 years… and 365% in 15 years thereafter! The end result:

Most of your major wealth gains will happen at the end of your working lifetime.

Not only will your initial investments reap the largest interest gains in later decades, more likely than not your 30+ years of work experience is commanding the highest salary you’ve ever earned, giving you more money to save.

I’ve you’re like me, you may have mistakenly imagined your financial progress as linear, with your net worth gains relatively equal across the years and decades of your life, when in fact you’ll likely see dramatic exponential growth in your savings and investments in the last decade before you retire — and depending on how much you withdraw, maybe even after.

So next time you get discouraged about the small pile (or lack thereof) of cash sitting in your bank account, remember, the rest is yet to come. 

We’ll be rich yet… once we get outgrow our twenties ;)

I provide the answer to the meaning of life, and other overshares of information

I am 1 hr away from sharing this in class so I thought I might as well put it on the site.

Hope you guys are having a great weekend!

Just get the first $10,000

I think $10K was a small tipping point for me. Which is weird to say, since I can’t remember when achieving that milestone actually happened (though I’m sure I blogged about it somewhere in the archives). But getting my savings account to be measurable in five-figures instead of four was a big deal. Maybe because I knew I’d stay in the five-figure range for a long time. After all: you only stay in four-figures for 9 thousand-dollar increments, but you’re stuck in five-figures for a whopping 89. When you’re in the five-figure savings club, you’re rubbing shoulders with people who actually have what can be vaguely described as wealth.

Ten-thousand is a big deal because it’s when you’re money starts to feel like it has some weight to throw around. It’s probably more than you earn in one month, or even two or three. It’s enough to be decimated back to a zero net worth in your typical run-of-the-mill emergency. It’s enough that you can look at semi-expensive things and think “I could buy three of those”. Then thousand dollars is resilient and sexy and just a little bit powerful. But perhaps most importantly,

after you get your first $10,000, every subsequent $1,000 will seem to come easier.

Or at least that’s how that’s felt to me. Consequently, I have somewhat of a mixed love affair with ten thousand dollars. I like the idea of a $10,000 emergency fund. I celebrated when I first hit $10,000 in stocks. I breathed a sigh of relief when I saved my first $10,000 in my RRSP. Even now when I log into my bank account I like to see the sum at around $10,000 — over that and I need to move money to different investment vehicles, under and I slow down my spending until it builds back up. There’s just something about $10,000.

$10,000 at 3% interest rate will earn you a return of $300 per year.

This is probably just enough for you to notice the boost. You’ll start tumbling towards $20,000 before you even know what’s happening. $30,000 will practically save itself. $40,000 will come and go by so quickly you might not even notice it. And so on. You don’t believe me, but I’m telling you the truth.

 Eventually it stops feeling like “saving” and starts feeling like just throwing money on top of a pile.

One of the best things about getting to your first $10,000 is then you know how to save $10,000. It instantly becomes less intimidating. If you’ve banked $10,000 on an average salary, it’s probably taken you more than a year, so you’re no stranger to discipline when it comes to your finances. You’ve also watched it grow a bit on its own with interest and dividends. It represents the things you didn’t buy, and thus you understand more than ever how much they were things you didn’t need, and that empowers you to keep saving going forward.

You need to save about $834/mo for a year to save $10,000. 

If that sounds like too much, stretch it out to 2 years — I even give you the how-to in a spreadsheet here.

I feel like now that I’ve mastered getting to $10K, it’s why $100,000 is my new favorite number for retirement and a downpayment on a home. I’m hoping the same is true when I hit six-figures: the first $100,000 is the hardest ;)

Want to avoid divorce? Spend less on your wedding

After some visits to wedding venues and discussions with my spouse to be, we’ve decided on an extremely low-cost wedding. Like, really low cost:

we’re expecting to spend less than $5,000 on our “big day”. 

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This comes as a surprise to absolutely no one, because I’ve been vocal about how disenchanted I am about the wedding franchise. Even if I was a super stoked bride-to-be, my MBA classes this term are killing me and I’m barely making time to eat and hit the gym under this academic workload, let alone plan a wedding.

Right now our plan is to rent out a small restaurant to celebrate with ~50 of our closest friends an family. Making this list is almost an impossible task, but I think the most surprising thing was how receptive and supportive my family was about having a super small wedding. If anyone’s disappointed that I’m not throwing a 200+ guest event, they’re hiding it well. So far I’ve gotten nothing but love and hugs at my decision to keep it low-key which has been a huge relief.. to our family relationships and our bank accounts!

Initially, I was swept up in the fun of party planning so it was hard for my fiancé and I to just be honest and admit to everyone and ourselves:

We cannot afford an expensive wedding. 

Only last year I was dead-set committed on being single for the rest of my life, so at no point was I squirrelling away money for wedding. Not that I had the change to spare: with my MBA tuition coming in at over $20,000 per year, I’m out of cash. Furthermore, both my fiancé and I have the bulk of our net worth tied up in RRSPs and stocks in our TFSAs, which means our savings is not exactly liquid for such an expense. While I’m sure our families will give us a few thousand dollars, it won’t be anything near enough to fund the cost of an average wedding. And lastly, I would never ever ever go into debt for my wedding. I just can’t. I remember how hard it was to pay off my $20,000 student loan debt, and I just don’t want to go through that again!

But even if we could afford to spend $20,000 on a wedding would we do it? Probably not. 

Future Value of $20,000 @ 5% return for 40 years = $140,800

That really says it all: spending $20,000 on a wedding next year will result in having $140,800 less in our bank accounts at retirement. If you think a $20,000 wedding sounds reasonable, as yourself if a $141,000 wedding does, because that’s what it’s actually costing you over your lifetime. That said:

You can spend as much or as little on your wedding as you want — and can afford

You are not more or less married by the amount of cash you drop on your big day.


Weddings are NOT financial assets. Spending more on your wedding day does not correlate to a better marriage — in fact, the opposite might be true: the more people spend on their weddings, the more likely they are to get divorced (maybe it’s because they finally do the math on the cost of their wedding!).

Starting off your marriage with a dramatic reduction in financial assets and/or huge uptake in debt is a recipe for disaster.

With “finances” still cited as one of the major reasons for divorce, my future husband and I have no interest whatsoever in going anywhere near potential financial and marital ruin over something as trivial as our wedding day.

I didn’t think there was any correlation between wedding spending and marriage quality until I saw those statistics. As far as I understood it, people that can drop tens or hundreds of thousands of dollars on a single day, do. And those that can’t, don’t.

There is one place we’re going to get spendy: the honeymoon of a lifetime

We’re already making plans to party it up big time with family in 2015. Last year I spent a week in Hawaii with my extended family, and next year we’ve decided on something even grander. Not only can my wedding not compete with the awesome that is this next elaborate trip, it seems redundant to gather everyone twice in a matter of a few months — but on the other hand, why not tack an extra week onto an already elaborate vacation and create a wholly unforgettable experience? Since this is a summer trip, it might actually happen before my wedding, but I’m not one to get particular about timelines. I’ll keep you posted on details once we firm up destinations and dates. One thing is for sure: the trip will cost more than the wedding!

In the meantime, I’m happy to devote my energy over the next few months to finishing up my MBA rather than hardcore wedding planning — while still looking forward to marrying the man of my dreams at the end of it all!

The $0 Weekend

Now that my Canadian Personal Finance Celebrity series has ended, I’m happy to bring back the $0 weekend! Below is a list of free fun to get you through this coming Saturday & Sunday. Enjoy!

The $0 Weekend

Pumpkin-Pie-Spice2-1-of-11. Make Pumpkin Pie Spice

It’s Fall and you’ve already had more pumpkin spice lattes than your body can handle, but you want more. Pumpkin spice oatmeal, pumpkin spice cookies, pumpkin spice in a jar you can just inhale at your leisure. I’ve got you covered: recipe here. You’re welcome.

Pain_&_Gain_Teaser_Poster2. Watch Pain & Gain

I can’t even. Mark Walberg is awesome and this movie is hilarious, and it’s extra funny if you’re into fitness and can laugh at yourself (or enjoy mocking those that are into fitness). It’s about a group of body-builders that kidnap a personal training client and torture him until he hands over all his assets to them. It’s crazy stupid, which is why it’s so shocking that THIS IS A TRUE STORY.

3. Convince someone to Tweet you a coffee.

Starbucks new promotion lets you send coffees to friends via twitter. It’s pretty rad, but if you want to keep your spending at $0 you’ll need to be a recipient not a giver ;) I received a tweeted coffee last month when a friend saw my snowy photos and decided I needed a Pumpkin Spice Latte. Everyone needs friends like that! Click here to see how it works.

TVD-6-temporada4. Get your Vampire Diaries fix

Oh, this show is in a downward spiral, but I can’t stop. The fifth season is now on Netflix and you get a doppleganger, and you get a doppelganger, everybody gets a doppelganger. But I will endure anything to watch Ian Sommerhalder. There is nothing I love more than curling up with tea and indulging in bad TV on a chilly fall day.

f290ff8d45b8d8f31146a92d9628a5e65. Make pumpkin-something.

Despite my excessive mentions of the beverage in this post, the pumpkin spice latte is NOT the only pumpkin worthy treat in autumn. My fiance was dubious when I dropped a $1.50 can of pumpkin puree in our grocery basket this weekend without any idea of what I was going to use it for, but the internet came through for me. Click here for 50 canned pumpkin recipes.