Promise #7 For The New Year: To Get Richer This Year


Boy, are you good! It’’s Tuesday and you have been with the ETR New Year’’s resolution program for seven days, including today. You are now in the top 20%! (And I bet I don’’t even have to remind you to reread your list every morning and evening, do I?) Today, we are going to help you get richer by making a two-part resolution.

You are going to promise that you will (1) make more money this year than you did last year, and (2) invest a higher percentage of your gross income than you ever did before. First, calculate what your income was last year – and resolve that you will make at least 10% more. Next, figure out what percentage of last year’s income you saved. If you banked less than 10%, your New Year’s resolution for today is to save 10%.

If you saved more than 10%, your New Year’s resolution is to save a higher percentage than you saved last year. If you’’ve never looked at a compound-interest chart, you may not fully understand the incredible power of long-term investing. If you invested only $200 a month for 20 years at 10% interest, you’d have a $151,874 nest egg. The same investment at 15% would give you $299,448. And over a 30-year period, that number would go up to $1,384,656. Yesterday, you promised to create for yourself an extra source of income.

Chances are you’’ll need to use that income to repay the investment you made to create it. That’’s fine. But if your new enterprise does generate extra income, I want you to make yourself an auxiliary promise: that instead of spending most of the extra (after-tax) income you earn, you will reward yourself with only half of it and invest the rest. The rest will go toward your new monthly investment program.

If you’’ve had trouble saving in the past, you need to make a strict discipline of it by putting money into your investment account first thing – before you pay any of your bills. Financial advisers call this “paying yourself first,” and it’s a good strategy. Make this particular New Year’s resolution very specific. Figure out exactly how much you can afford to invest and do so. And, yes, keep reading over the resolutions you’ve made so far – every night and every morning.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]