Let’s say that Early Eddie and Dedicated Dave were born on the same date. And at a young age, both of them developed the ambition to become millionaires when they retired. But that’s pretty much where the similarities end.
You see, Early Eddie grew up with parents who were both college graduates. And since they believed in the importance of education, they also helped him pay for some of his own college tuition costs.
On top of this, wanting to see him reach his goal, they gave him the good advice to start investing early. So, he took their advice and began investing $500 a month starting at the age of 25. However, for some strange reason, at the age of 35, he started following the wrong crowd and stopped investing.
And if that wasn’t enough, having developed some bad money habits, he started making frivolous, impulsive purchases instead. From that point, he spent the rest of his working life paying off numerous credit card debts.
On the other hand, Diligent Dan grew up with parents who were forced to start working when they were young. As such, they weren’t even able to finish high school.
So, Dan got off to a rough start in life and had to pay his own way through college. In addition to this, he had to support his aging parents for a few years as they dealt with some disabilities. As a result, he didn’t start investing until the age of 35.
However, not one to make excuses, he overcame all of these obstacles and was still committed to building wealth. Plus, he also got some good advice from a close friend, telling him to invest regularly. So, he also started investing $500 a month, keeping up this habit until he reached the age of 65.
So, let’s say both Early Eddie and Dedicated Dave‘s investments grew at the same rate of 8 percent each year. Who do you think has more money when he retires at the age of 65? And who do you feel deserves to have more money?
Now, before we answer the first question, let’s review what we’ve learned so far. Early Eddie invests a total of $60,000 over 10 years, while Diligent Dan invests a total of $180,000 or 30 years. Or, to put it another way, Diligent Dan invests for three times as long and invests three times as much money.
Ok. So, who actually ends up with more wealth?
Well, it turns out that Early Eddie becomes a millionaire, ending up with over $1,000,300. On the other hand, Diligent Dan ends up with under $750,000, falling short of his goal.
In other words, even though Diligent Dan invested 200 percent more money, he ended up with over 25 percent less wealth than Early Eddie. Or, to put it another way, Early Eddie invested 66 percent less money, yet ended up with more than 34 percent more wealth than Diligent Dan.
So, to summarize, take a look at this chart.
| Diligent Dan | Early Eddie | |
| Starts investing at . . . | 35 years old | 25 years old |
| Invests $500 a month for . . . | 30 years | 10 years |
| Invests a total of . . . | $180,000 | $60,000 |
| With a growth rate of 8 percent per year, when retiring at age 65, has . . . | $745,179 | $1,000,324 |
This shows the tremendous importance and incredible power of investing early and often.
