The-Slight-Edge

Afterword 195
As our country deals with its own $13 trillion national debt and a shrinking
Social Security system that is going bankrupt, it’s pretty clear my generation will
have no other choice but to take responsibility for our own savings and retirement
plans. The good news is with proper planning rooted in the Slight Edge philosophy,
we can rest assured we have everything we need to live out our golden years.
When it comes to finance you always want the Slight Edge of interest
working for you not against you. If you understand the value of time and the
amazing principle of compounding interest, then you know that consistently
saving a little, especially at a young age, can help you amass a small fortune for
your retirement.
For example, a 24-year-old invests $2,000 a year for six years. If left
untouched in an interest-accumulating account, that $12,000 investment will be
worth over a million dollars by age 65. That is an example of what we call the
Slight Edge working for you. Unfortunately, interest can also have an opposite
effect. This is how the Slight Edge can work against you. Say at age 24, instead
of investing $2,000 a year for six years you purchased $2,000 worth of items on a
credit card that you were not able to pay off at the end of the month. A latte here
a DVD there, doesn’t seem like much at the time of purchase, but when using a
credit card to buy these items it can have a painful effect for years to come.
Let me show you.
If you added $2,000 worth of debt to your credit cards each year for six years
and were never able to pay them down, that same interest that was working for you
in the first example to become a millionaire is now working against you as your
credit card debt accumulates compounding interest. That overspending of a few
thousand dollars for a few years will be over $1 million in debt by the age of 65.
This is an extreme example, but I think you get the point. You have a
choice with every dollar you earn. Are you going to put it somewhere where
interest is working for you or against you? It’s a Slight Edge decision you face
every day.
Just for fun, let’s break that $2,000 a year into a daily amount, since we are
talking about daily disciplines here. That $2,000 a year is approximately $5.50 a
day. I can easily save $5.50 a day, but the problem is it’s just as easy not to save
$5.50 a day because we don’t recognize in that daily decision how much of our
future financial security is resting on that $5.50 a day. I could easily spend this
amount on a magazine, a large latte, a smoothie, etc. But knowing the Slight Edge
like I do, I would know that saving $5.50 a day is going to get me to my $2,000 a
year, which is eventually going to make me a millionaire at retirement.