If we have nothing but a house payment, two car payments, three credit card payments, and four kids that require more monthly maintenance that the two cars… how on Earth do we get started with an investment plan? Most of us don’t have a large inheritance or a winning lottery ticket — so where do we get that principal? The answer of course is that we must tend to the difficult and disciplined work of budgeting and saving money. I know… it’s not fun to even think about, much less to execute. But it is essential to financial health and success. Plus, the imagined drudgery will turn into enjoyment when you’re able to control your finances by managing them, instead of them driving you to the poor house. Knowledge is power, as they say! Getting started with a home budget If you are a budgeter, you wouldn’t believe how many people don’t have a home budget. If you’re not a budgeter, you probably know you need to be but just keep putting it off. If you’re procrastinating on this, I’ve got two suggestions: Your financial health won’t improve in any length of time unless you’re on top of your spending habits. You’ll likely be disappointed with your retirement, if you don’t know what it will truly take for you to live the life you desire. The on-line tools for budgeting are great these days, and many are available for free. There’s also a lot to be said for the old method of using pad and paper, and separating cash for budgeted items into envelopes. If it isn’t there, you can’t spend it. Somewhat old-school, but it works for many! Once you have the desire and the tools, start following the essentials like taxes, food, rent, and clothing. Savings is one of the items that need to be high on the list as well. The benefits of compound interest Consider this: if you invest $100 on the first day of the month, every month for forty years — and you earn a 2% annual return – you’ll have over $73,000 in savings. Think of this as money you wouldn’t have had if you hadn’t started saving! Shoot, even if it returns zero percent… you still have $24,000 socked away! Conversely, if that return happened to be 6%, then there’s almost $200,000 in your nest egg. And if you put away $500 each month – you see where this is going! Compound interest over time can do wonderful things for your savings or IRA, but if you don’t save at all you’ll simply end up with zero. Start saving today In any case, I strongly recommend that you start saving right away – and if you already are saving, start increasing the percentage you save every year. You don’t have 40 years until retirement, you say? The truth is that every day counts, regardless of your income or age. If you’re having trouble coming up with an investment or savings plan, a financial advisor can help. Think of it as building your dream home. Every dollar of debt paid down is a brick in the wall; every dollar saved is another brick. Over time, you’ll build that home, the retirement and lifestyle you seek. Updated March 2019 Originally posted May 2016 Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.