The power of time and one way to use it

Time is inexorable.

Imagine that you are in a railway car, one from which you cannot escape. It moves at a constant rate toward some distant end. You may want to go slower, or faster, but cannot. You can earn and spend money to buy things. Bigger house. Nicer car. Great clothes. But you cannot buy more time. That railway car just keeps chugging along, day after day, year after year, to a remote, misty end.

When the journey is new, and we are young, and that shiny track extends far over the horizon, we think that time is limitless. We think nothing of wasting it. Wishing it away. “If only it were Saturday.”

But as the journey progresses, our life events pile up and mark time’s passing. Marriages. Births. Deaths. We become more sensitively attuned to our journey. Now, each new year, each birthday, each season, gives us pause, because the remaining ones are suddenly quite finite and countable. We don’t know how much further this train has to travel, but sense that our journey has an end.

Time is, in fact, our only priceless, irreplaceable possession. We only have so much, and it passes relentlessly whether we use it wisely or squander it foolishly. Time doesn’t care. But we should.

How can we best use and appreciate our time, this infinitely precious gift which has been bestowed upon us? Books have been written on making memories, forming bonds, creating and giving, all things which enrich our lives and make our time more valuable. But let us focus on one bit of advice to those who are  still young, who have the power of time in their favor.

Let’s say you are 20-something, just out of college, in your first job and enjoying life (as you should). Although it is far distant, you should give some attention to enjoying your retirement as well. After a long working career, you and your family will deserve to relax, travel, and otherwise relish a well-earned retirement.

But today, many American families are ill-prepared. According to the Economic Policy Institute, “nearly half of families have no retirement account savings at all.” Social Security is a wonderful foundation, but is not enough on its own and must be supplemented. The most important thing you can do is to regularly contribute to a tax-advantaged retirement account (401K, 403B).

At this point in your life, you will have forty years or so to build that retirement cushion. And that much time is a powerful ally.

Here is a hypothetical case of an individual approaching retirement. Let’s call her Sally.

Sally is 65 years old and plans to retire in the next couple of years. As a young woman, she decided to provide for her future by regular investment in the stock market. Starting in January of 1976, she began saving about $6.50 per day and at the end of each month bought a $200 share in an S&P 500 fund. She repeated this month after month for 40 years.

We all know the market has seen some terrible crashes along the way. But Sally persisted and invested $200 each month, a technique she may not have known is called dollar cost averaging. By investing a fixed amount each month, she automatically bought more shares in a down market and fewer shares in a costly market. Over the forty years of her investment career, Sally maintained her discipline, allowing the balance to ride and adding her monthly buy like clockwork. What are her results?

Forty years is 480 months, so Sally invested a total of $96,000 (480 x 200). But she allowed all dividends and earnings to accumulate and grow, and never lost her nerve. At the end (based on actual stock market returns) she would now have $600,000 in her account. Not bad for the cost of a hot dog, cup of coffee, and a lottery ticket every day.

Better still, Sally can begin drawing regular payments from her nest egg, $3000 per month for the next 20 years (assuming a nominal 4% appreciation rate). That’s on top of her Social Security. Look out Tuscany, here we come!

This is not to advise you to invest only $200 per month. On the contrary, invest as much as you comfortably can. Many companies will provide a match for 401K contributions up to a certain percentage of your salary. You should always invest enough to get all of that matching contribution. It is quite possible to retire with a million dollars in your pocket.

Time is a powerful ally. But unfortunately, to take advantage of it, we must start young. And that’s precisely when we don’t appreciate it. God’s way, perhaps of keeping us all from becoming millionaires.