Everybody has an invisible employee. Some seem to have more invisible employees than others, but the great thing is, everyone has them. This particular employee doesn’t have any feelings to consider for, will never complain, and you legally control it like a slave. What employee am I talking about? Time.
An Invisible Employee Who Doesn’t Complain
Time is intangible and can’t be seen. It’s something quick that you feel. One second passes, another passes. It’s an employee that can work its hardest for you, but it can certainly act to your detriment if you don’t keep an eye on it. It’s a sneaky employee. If you don’t use it, you’re wasting it away. In what area do you use this employee? Investing.
The greatest asset that someone can have is time. Even if you don’t like it, you hired it. The best part is, you don’t need to lift a finger to train, develop, or command it. It exists and serves to work for you or against you, the choice is yours. I’ve said before that just one MPH extra will get you to your goals. The other thing you need is time.
The two greatest mistakes that investors make in investing in the stock market is: 1) not participating in it and 2) not regularly contributing in it. By knowing your future big purchases, whether it’s a couple of days, years, or decades, you can work time’s fingers to the bone.
Big purchases include retirement (yes, you’re technically buying retirement little by little), healthcare, and your children’s education costs. You WILL pay for these services, unless you’re planning on having someone pay for retirement, not having health issues in your life, or having your children get full-ride scholarships. This is the ideal scenario, but it’s unrealistic to have all 3.
There’s a number of years before you reach this stage and time can be the invisible employee that helps plan for that stage.
When Time Works For You
The stock market has generally returned 6.5 – 7.5% a year on average. I have complete faith that it will do the same going forward (technologies are creating extra value for the world incredibly quickly). That’s why I put 90% of my 401k’s portfolio into the S&P 500 equivalent. Since I can’t withdraw my 401k money penalty free until I’m 59.5, I have 37.5 years before I will withdraw that money.
A dollar invested today with the stock market returning 7% a year (the midpoint of the above range) means that the dollar will be turned into $12.64 when all I had to do was lift a finger to set up the 401k contributions. 12.64 times! Yes, it will not be the same as owning $12.64 today but I can guarantee the $12.64 in the future will have more purchasing power than $1 today (dollar menus aren’t really “dollar” menus).
This is the power of time. Having only 1 year until I retire will mean that I will only have $1.07 by the time I retire. The extra 7 cents won’t be meaningful. The fundamental lesson is that the financial benefits realized isn’t linear. It’s exponential. After a decade of reaping its benefits, the amount of benefits seem to increase more than the year before. That is fantastic.
It also brings me to my next point. Time can be cruel and work against you.
When Time Works Against You
Not taking advantage of this invisible employee means that it’s working against you. This particular employee is one you don’t want to be absent in your empire. Neglecting to take advantage of it means that retirement, healthcare costs, and education can’t be properly funded. You definitely don’t want to neglect its existence.
Time can’t be relived. It’s a nonrenewable resource. Once a second passes by, it’s gone. Forever. Why not take advantage of it while you can? I contribute as much as I can to my 401k and then I forget about it. I check Personal Capital now and every then, but I never do anything to my portfolio. I sometimes forget it even exists.
I sure don’t want to be on the bad side of time. Time has the power to make or break me, and I don’t want it to break me, especially when it’s easy to take advantage of it.
I have a significant amount of time before I reach the retirement age. I personally don’t know when I’ll retire. Financial independence is a lucrative state that I want to be in but I’m unsure if I’ll use the money to retire early. When I started this blog, all I could think about was reaching early retirement. Now, I feel more at one with reaching financial independence than early retirement.
Regardless of which goal that I want to achieve, both of them require me to exploit time. No one is going to slap me with a lawsuit for exploiting it, which is the best part! Even 10 years does wonders for someone’s portfolio than 5 years. Exponential wonders, in fact. It’s not a linear benefit that is realized, it’s an exponential benefit.
Readers, are you taking advantage of this invisible employee? Do you agree that it can make or break you? Let me know in the comments below!
My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!
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