Can your behavior be affecting your personal finance? How will your behavior affect your financial wealth in your later years in life? What is the real cost of delaying savings or protections now for 1 year? 5 years? 15 years? 20 years?

How will your bad behavior affect your future finances?

Impulse buying, delaying your savings plan and even stress can affect your financial behavior here are some positions to not be in when working on your future finances.

1. Debt Accumulation: Don’t live above your means and max out your credit cards. Interest will catch up to you and bad credit scores can affect your leverage.
2. Poor Credit Score: Bad credit score is unfavorable. When you borrow money, you want the lowest interest rate possible. The lower the credit score the higher the interest rate.
3. Lack of Savings: You need an emergency fund. If you always spend more than you have you will be stuck dipping into your long-term savings or even worse maxing out a credit card with a high interest rate.
4. Inadequate Retirement Planning: Creating a behavior of putting off your retirement savings can have huge effects down the road. There are examples later in this article.
5. Financial Stress: Money problems can lead to stress, stress can lead to problem sin your social and professional career. Having a conservative behavior can limit the amount of stress in your life.
6. Limited Career Choices: If you work to pay your bills with more month left than money you’re in a limited career choice. Your behavior is reflected in your career choice.
7. Limited Education and Skill Development: Do your research, make sure you are up to date with your financials and create a behavior to continue your research as to where you money goes and why it goes there.

How can good behavior affect your personal finances?

Creating good behavior when it comes to your finances can show significant improvement to your savings plan and your financial well-being. Learn and master these behaviors and you will see your results compound in no time.

1. Savings and Investing: Good financial behavior involves saving money regularly and making wise investment decisions.
2. Debt Management: Being responsible with debt behavior includes managing debt effectively. Paying off debts on time, avoiding high-interest debt, and having a reasonable debt-to-income ratio.
3. Budgeting: Creating and sticking to a budget is a great behavior and fundamental to learn.
4. Emergency Fund: Save 6-12 months of your gross salary in a savings account so you don’t have to worry about unemployment, or any huge expenses being put on your credit card.
5. Financial Education: Do your research, educate yourself in the best techniques and review your plans often. Knowing what’s going on is the best way to avoid tragedy.
6. Long-Term Planning: Set goals and create a road map to where you want to be. Now is a good time to be specific. About exact money, rates of return and risk management.
7. Prudent Risk Management: Diversify, insure and be honest with your tolerance.
8. Frugality and Smart Spending: Live within your means, cut coupons, shop deals, and be active in your spending while sticking to your budget.
9. Regular Tracking and Adjustments: Keep an eye on your investments, do a semi-annual review, your financial professional should be with you during the review.
10. Legacy and Generosity: Get insurance, check for living benefits and set up your estates, wills and trusts. Need to know more? Here is an article to help you!

What is the cost of delaying a 20 year savings plan?

Whatever the cost is, remember to multiply it by the years. Compounding interest is so powerful delays aren’t added to but multiplied!

With inflation your $1 today is worth less than your $1 next year. If you can have that dollar invested to hedge inflation you are a step in front of inflation.

1. Lost Opportunity for Compounding: compounding interest is doubling your money. Your $1 becomes $2. When compounding your $2 becomes $4 and so on. Losing out on the compounding effect can have substantial loss later in your financial life.
2. Reduced Total Savings: When you delay saving for a year, you contribute one year’s less worth of savings to your investment or savings account. Even if its as little as $1,000 a year that’s still a loss in the later years.
3. Smaller Retirement Nest Egg: If your 20-year savings plan is for retirement, delaying it by a year means you’ll have one year less to build your retirement nest egg. The direct results can be having to work longer into your golden years and investing more monthly to make up the difference.
4. Increased Saving Burden: To make up for the lost year, you may need to save more aggressively in the remaining 19 years to achieve your financial goals, such as a down payment on a house, a college fund, or retirement savings.
5. Missed Investment Returns: The money you didn’t invest during the year of delay means you also missed potential investment returns. Even if you save the same amount in the subsequent years, you won’t have the additional year’s worth of investment gains.

If I want to retire at age 65 and I invest $200 a month starting at age 30 with 7% interest how much money will I have?

Here is where the nerdy part of this article comes into effect. I will leave the formula in the first example, so you know how I got to the answer. I will give later comparisons without the use of the formula.

To calculate the future value of your retirement savings when investing $200 per month starting at age 30 with a 7% annual interest rate, you can use the formula for the future value of an annuity. In this case, the annuity is your monthly contribution. The formula is:

��=���×((1+�)��−1�)FV=PMT×(r(1+r)nt−1​)

Where:

• FV = Future Value (the amount you’ll have at age 65)
• PMT = Monthly Payment ($200)
• r = Monthly Interest Rate (annual interest rate divided by 12 months)
• n = Number of Times Compounded per Year (assuming monthly contributions, n = 12)
• t = Number of Years (age 65 – age 30 = 35 years)

First, convert the annual interest rate to a monthly rate:

�=7%12×100=0.0058333r=12×1007%​=0.0058333

Now, you can plug these values into the formula:

��=200×((1+0.0058333)12×35−10.0058333)FV=200×(0.0058333(1+0.0058333)12×35−1​)

Calculating this expression will give you the future value of your retirement savings:

FV = 200 \times \left(\frac{(1.0058333)^{420} – 1}{0.0058333}\right) \approx $315,215.05

So, if you invest $200 per month starting at age 30 with a 7% annual interest rate, you’ll have approximately $315,215.05 by the time you reach age 65. Please note that this calculation assumes a consistent 7% interest rate over the entire 35-year period, and actual returns may vary.

What if I start at age 35 instead?

The total of your investment will be around $171,527.46. That is a difference of $143,687.60. That’s only 5 years later than when you would have originally started.

What if I chose the same program but started at age 40?

Sadly, you would have to invest a lot more money. Your total will only be around $119,685.34. That isn’t enough to help supplement your retirement.

What if I were to start at age 25?

The total will be $572,452.03. But wait 5 years earlier why is it almost double. That’s the power of compounding interest. If you delay 10 years its almost triple what you would have saved.

Here is where it can hurt, what if I were to start at age 21?

The shocking answer is $909,703.77. That is almost a million dollars.

So, if you start investing $200 per month at age 40 with a 7% annual interest rate, compounded monthly, and plan to retire at age 65, you’ll have approximately $119,685.34 by the time you reach age 65. Starting at age 40 provides you with significantly less time for your investments to grow, resulting in a smaller retirement savings fund compared to starting earlier.

Here’s a table comparing the future values of the investment for each starting age until age 70:

This table shows the future value of the investment when you start at different ages and continue investing $200 per month until the age of 70, assuming a 7% annual interest rate. As you can see, starting earlier results in significantly higher future values due to the longer investment horizon.

This emphasizes the importance of beginning your savings and investment journey as early as possible to build a substantial nest egg for retirement. If you delay your $200 a month turns into a lot more out of pocket because of your behavior. The monthly contribution you will need to make is around $1,001. That’s all because of your behavior.

Do you have children? What if you start this type of savings plan for them when they are born. They can be their own bank for the rest of their lives. They don’t have to worry about their behavior when it comes to their money they are being trained at a young age. You don’t even have to invest $200 a month since you are starting them so young it can be extra money lying around and even money they get for their birthdays or special occasions. This is called a million-dollar baby program.

Include this program with other savings like a 529B plan and they now have a stable financial future because your new behavior helped them. How would you feel knowing you have created a financial legacy for each one of your children just because you changed your behavior?

In essence, personal finance is not just about numbers; it’s about the habits, choices, and decisions you make concerning your money. Your behavior shapes your financial outcomes and can either lead to financial success or difficulties. Developing positive financial behaviors, such as budgeting, saving, and making informed choices, is crucial for achieving financial well-being and achieving your financial goals.