By - Joseph Perrotta

The $1 Million Financial Planning Mistake Made Under 30

So, you’re 21 years old, just graduated college, found yourself a job, and found your first apartment.

Congratulations, you made it!

You’re making $30,000 and barely getting by, but you’re out!

Bring it on, world.

Your first paycheck comes, and after paying your bills, you decide to splurge a bit and go out to a nice dinner.

Why not, you deserve it, right?

Of course you do.

But next week comes, you go out again. Then the week after, and the week after, and before you know it you’re spending a couple hundred dollars a month on food and drinks, with little left over for saving.

But who cares, really? You’ll get to it in a few years when you’re making a little bit more money.

You’re just having fun!

While I completely understand this mentality (and lived it out of school), and do not want to be the one to stifle your good time, delaying saving in your earlier years can lead to HUGE differences in your finances later in life.

Let’s look at a quick example using two story lines (For the sake of conversation, we’ll use Joe and Sarah as names, which happen to be the names of my wife and I).

    Joe and Sarah both graduated college last year and got jobs paying the same amount of money.

    They both get an apartment, buy a new TV, get a gym membership, and are living comfortably.

    At the end of each month, they have $200 left over to spend.

    Sarah, having an eye for fashion, decides to splurge a little bit (sorry honey).

    She decides to go out and buy a nice new pair of shoes (since writing this post I was informed $200 is not a lot to spend on shoes, which was news to me. Sorry, ladies, for offending your sense of fashion).

    She deserves it, right?

    Joe, not really minding wearing the same sneakers he’s had for the past 10 years, decides to save and invest that $200.

    This continues for the next 10 years.

    At this point Sarah has 120 new pairs of shoes (this is quite an exaggeration), and decides that she can start saving a bit.

    So she begins saving the $200 per month she had been spending on shoes. However, it is now 10 years later

Okay, so she’s a bit late to the game. She’s only 30 (or 31, or whatever age she would be at this time).

How big of a difference can 10 years make?

She still as another 30 or 40 years left to save.

Okay, here are the numbers:

If Sarah begins contributing $200 per month to an investment portfolio that earns 10% per year for the next 30 years, she will have ~$410,000 at the end of that time period.

Not too bad for only contributing $200 per month.

Joseph, on the other hand, who began contributing $200 per month 10 years earlier, WILL HAVE A TOTAL ACCOUNT BALANCE OF ~$1,110,000!

That is a $700,000 difference!

That is a very, very big number.

Do you think those shoes were really that valuable?


That equates to about $5,000 per pair (and I don’t want to get into an argument defending myself that $5,000 for a pair of shoes is completely ridiculous).

But imagine what these numbers would look like if you adjusted for inflation.

They would have to be HUGE, right?

I sure wish we could figure that out…

Oh wait, we can!

Adjusting each payment at an annual inflation rate of 3% (meaning year 1 monthly payment is $200, year two monthly payment is $206, etc.), the numbers are as follow:

Sarah would have saved ~$538,000.

JOSEPH WOULD HAVE SAVED ~$1,532,000!!!!!

That is almost a $1,000,000 difference!

Is there really anything that important you can’t manage to save an extra ~$7 per day?

Go to WaWa instead of Starbucks (or whatever local coffee shop you have). Bring a lunch instead of going out, carpool to work.

There are countless opportunities for ANYONE to save a few extra dollars a day.

Now, I don’t care if you’re 20 or you’re 50. The same message applies.

There will always be distractions, and excuses, and reasons to put off until tomorrow what can be done today.

We’re only human, right?

However, you have to start somewhere.

Why not make that day today?

Right now, make a decision to start.

Whether it’s setting up an automatic withdrawal from your checking to your savings, having a friend or personal financial advisor to coach you, or putting a pink piggy bank on your bedside table, the cost of waiting is too large to delay.

Note: If you have any good tips or tricks to start or maintain your saving, please share them below! Thank you!