Savings 101

Saving and investing for retirement should be one of your top priorities. Some people don't think it is important now and will put it off until later, but that's a bad idea. It's actually more important to save now, rather than later. For example, consider the two scenarios below:

1. Saving $11000 from age 25 to 34 and $0 from age 35 to 55. Annual return of 9%/year
   
2. Saving $14000 from age 35 to 55. Annual return of 11%/year
   

At age 55 (theoretical retirement age), which scenario do you think would have more? Many people would think it's scenario two since the contribution is higher, length of contribution is longer, and the annual return is higher, but that's wrong. Scenario one would actually have slightly more. Scenario 1 also only requires a contribution total of $11000x10=$110000, whereas scenario 2 would total $14000x21=$294000. This example demonstrates the importance of saving early.

For those who don't believe me, take a look at the table at the end of this post. It shows the amount of money for each scenario from age 25 to 55.

Every year since I started working full-time, I've been contributing the maximum (allowed by law) into my 401k and Roth IRA account. If you're not, then you should examine your finances closely to see where you can cut back.

Age Scenario 1    Scenario 2
25  11000         0
26  22990         0
27  36059         0
28  50304         0
29  65832         0
30  82757         0
31  101205        0
32  121313        0
33  143231        0
34  167122        0
35  182163        14000
36  198558        29540
37  216428        46789
38  235907        65936
39  257138        87189
40  280281        110780
41  305506        136966
42  333002        166032
43  362972        198296
44  395639        234108
45  431247        273860
46  470059        317985
47  512364        366963
48  558477        421329
49  608740        481675
50  663526        548659
51  723244        623012
52  788336        705543
53  859286        797153
54  936622        898840
55  1020918       1011712

Flight home

My flight home was scheduled for Dec 21st, but when I arrived at the airport I was told that the flight was cancelled. I was given an 800 number to schedule a new flight, which took 15 minutes to get through. My original flight was a direct flight, but my new flight, which was the next day, had a connection though Dallas. I dislike connections since they take up so much extra time. I'm usually willing to pay up to $40 more for a direct flight.
The next day when I checked online, I didn't actually have a seat on the Dallas-Chicago flight. I was a bit worried that I wasn't going to be able to get a seat on the flight. When I did my electronic check-in at the airport, I was given a priority seating pass instead of a ticket for the Dallas-Chicago leg of the flight. The pass said to bring it to the gate (in Dallas). When I arrived in Dallas, I went to the gate and they exchanged the pass for the ticket. I'm assuming they would eventually find a volunteer to give up his seet in exchange for a travel voucher.
My flight in Dallas ended up being delayed for 2 hours. It's a good thing my flight wasn't any later, since the later flights to Chicago was cancelled that day. By the time I reached my final destination (my brother's house), I had been traveling for 11 hours, not including the day I lost due to the cancelled flight! My total travel time is usually less than half of that.