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Invest Early, Invest Often

A recent article about wealth inequality in the US and the growing wealth gap highlighted the stark difference between the top 1% and all others. Total wealth (assets minus liabilities) in the US is estimated at over $100 trillion (Brookings Institute). It’s estimated that the top 1% accounts for a third of total wealth in the US and more than the entire middle class combined. Financial assets (cash, stocks, bonds, mutual funds, pensions, 401k’s, etc.) accounts for the majority (almost 75%) of the wealth. Real estate makes up the bulk of the remainder.

While politicians will debate (alright, fight) over the best ways to redistribute this wealth, we should instead focus on the ways to grab a slice of the pie ourselves. What better way to join in on the wealth than to be a part of it. We each have the ability to control much of our own destiny and future well being. How? By investing early and investing often. Yes, that is a take on the old adage of saving early and saving often. Sure, it’s old and perhaps boring but it is true; but don’t just save, invest.*

Again, how? Here are some practical steps:

I was given some great advice at my first job right after graduation: to put as much as you can afford into your 401k or retirement account right from the start, as soon as you are eligible. After a couple of paychecks, you won’t miss the difference as you adjust to your net income. This was terrific advice then and holds true for me today, even after 30+ years of investing in my 401k. Investing $100 in your 401k every two weeks for 30 years results in $255,189 at a 7% annual return.*Source: Bankrate Calculator. Of course, over time your contributions should increase as your salary increases and the end result will be even higher.

Here’s another saying: If you don’t have to spend it, don’t! What’s the best way to have some money to invest? By not spending it! Again, not the easiest thing to do, but doable. It used to be keeping up with the Joneses but nowadays instead of feeling the pressure of keeping up with a handful of friends and neighbors (no thanks to social media, like Facebook) we are trying to keep up with literally hundreds, if not thousands, of others who post their latest travels, vacations, purchases and other good fortunes for all to see. Many are made to feel as if they are “missing out” so in turn, try to do the same. Delete the app, close your account, or just don’t open it up. Again, it’s hard but resist, and you’ll find yourself not being jealous and not spending to keep up. Do you really need the latest phone, latest flat screen or $500 sneakers??? Truth is you probably don’t, so don’t.

If you list and go thru all your expenses in a month, you are more than likely to be able to find several unnecessary expenses that you can easily do away with. You can often see that you are nickel and diming yourself to death without realizing it. Many don’t hesitate to spend $5 on a cup of coffee twice a day but are reluctant to spend $25 on a copay at their doctor’s office even once. After just three days the daily coffee (when free options are usually available) is more costly than preventative health care. Investing just $10 a week in a taxable account will grow to $39,461 after 30 years. This again assumes a 7% annual rate of return and a 20% tax rate. *Source: Bankrate Calculator.

Another piece of great advice: find reasons to save and invest. They call it goals based investing but whether it is for a new car, your first house, your retirement or even a vacation, set aside money and invest. Especially when you’re young, it is very hard not to keep up with your friends to go out several nights a week and enjoy life. What’s the saying- YOLO? (you only live once) Even cutting back one day a week and setting aside what you would have spent that night, starts to add up. Investing $50 per week for 30 years results in $197,305 at a 7% rate of return and 20% tax rate. *Source: Bankrate Calculator.

Don’t just save, invest it in the stock and bond markets. Back in the day the only non-costly way to save and invest was to open a savings account and perhaps get a free toaster. The down side was that you didn’t always earn a whole lot. It was fine when interest rates were high. In 1980 the 6mo T Bill was over 11%- can you imagine that? However, interest on savings accounts is more typically less than what can be earned by investing. The other downside back then was that investing in stocks and bonds could cost you $100 per transaction. Nowadays, with low cost brokerage accounts, MFs, ETF’s, round up apps and the like, you can invest in stocks for no commission and as little as $5 at a time (that cup of coffee). All it takes is a bit of adjustment and discipline. After time, it all adds up.

As you get raises, change jobs for higher pay or get a promotion, don’t plan to spend all the new wealth. Plan to save some of it as well. Even if after your first year you only saved $1,000, that’s $1,000 more than what you would have had before. Over time, those thousands start to add up and begin to compound. As it does a 10% return that once equaled $100 now might equal $1,000 or $10,000 or $100,000 as your wealth increases. Yes, it takes many years and discipline but it is achievable and never too late to start.

OK, so these steps might not get you in the top 1% but you do have the ability to participate in wealth generation and to close the wealth gap by taking actions on your own. The top 1% continues to grow their wealth by staying invested. You can do the same. If you sum the three examples above: 1) $100 every two weeks in your 401k, 2) saving and investing just $10 a week of your coffee money and 3) saving and investing an additional $50 per week; totals $491,955 after 30 years and a 7% ROR.* These simple and relatively small amounts are achievable and can be much higher. Politicians won’t get you there, your actions will. Invest early and invest often.

We have many partners whose investment management expertise can help you as well. For help in finding the right one for you, please feel free to contact me at

Jim Okamura, President FSTC


*Investing is not risk free and there are no guarantees. You should carefully consider your risk tolerance, time horizon, and financial objectives before making investment decisions. By investing, you run the risk of losing money or losing buying power (where your money does not grow as fast as the cost of living). Risk can be classified into many different categories, and by knowing those categories you can better manage expectations and avoid or reduce certain kinds of risk.

The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only. FSTC does not offer tax, legal, or investment advice, professional counsel should be sought for tax or legal advice.

Jim Okamura
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