One of the most common financial mistakes I see is not necessarily bad investing decisions, but delayed investing decisions.
A surprising number of intelligent, responsible, high-earning people spend years sitting on the sidelines. Not because they are careless with money, but because they are waiting for clarity, confidence, to “get to it”, or the “right” time to start. They want to understand Roth vs. Traditional IRAs perfectly before contributing. They wait to increase their 401(k) because they are unsure where markets are headed. They leave excess cash sitting idle because they are worried about investing at the wrong time. In many cases, they are actively thinking about their finances every day, yet little action is actually being taken.
The difficult reality is that delay often carries a much larger cost than imperfection. Someone contributing enough to receive a full employer 401(k) match is effectively receiving an immediate return on part of their contribution, yet many employees delay participating for years (that’s a return of 50-100% in most cases!!). Others spend months researching investment strategies while missing the opportunity for compounding altogether. A person who waits five or ten years to begin investing may ultimately need to save dramatically more each month later just to arrive at the same destination. Time is one of the few advantages in investing that cannot be recovered once lost.
Consider Joe & Barney: they both eventually want to retire at 65 with a comfortable nest egg, achieving a 7% return. Joe starts investing $500 per month at age 25 and continues consistently. Barney waits until age 35 to begin, but he invests $1,000 per month to “catch up.” Even though Barney contributes twice as much each month for 30 years, ($120,000 more overall), he still ends up with $60,000 less by retirement. The gap is not driven by discipline, volatility or product, but by a single decade of lost compounding. (You can play around with the numbers here to see the impact depending on the variables.
What makes this particularly interesting is that the delay is rarely caused by laziness. More often, it comes from a desire to make the “optimal” decision. Analytical people especially struggle with this. They want certainty before acting, but investing does not really offer certainty. There will always be another headline, another recession prediction, another election cycle, another market concern. Waiting can feel responsible in the short term because it feels like preparation, but over time, it often becomes a form of financially expensive indecision.
That does not mean people should invest recklessly or ignore risk. Practical financial planning still matters. Short-term cash needs should generally be treated differently from long-term retirement assets. Someone planning to purchase a home in two years likely should not invest those funds the same way they would invest retirement savings intended for decades from now. The key is building a framework rather than waiting for perfect confidence.
So what should you do?
- Capture your employer match (consider the cash flow and tax consequences)
- Consider ROTH vs Traditional (again, consider cash flow and tax consequences)
- Automate consistent contributions
- Maintain an appropriate emergency fund (usually 3-6 months of living expenses)
- Using diversified long-term investments instead of trying to predict short-term market movements, and
- Utilize High Yield Savings Accounts (to outpace inflation; you can shop for rates here)
One of the most important things people eventually realize is that financial confidence usually does not come before action. It comes after taking the first few steps. Most experienced investors did not begin with complete certainty or perfect knowledge. They started, learned over time, adjusted where necessary, and benefited from the simple fact that they allowed time to work in their favor instead of against them.
As Warren Buffet said: “My life has been a product of compound interest. Nothing more. Nothing less. And nothing brilliant.” Now maybe Warren doesn’t consider himself brilliant, but many would humbly disagree, for the simple fact that he was extremely successful and also preached simple, honest and impactful investment advice for decades.
So take advantage of your time and maximize this “8th wonder of the world”. Your future self will thank you for it, and more importantly, you will feel a happier today knowing you’ve made the right choices.
Looking back, what financial decision are you most glad you started earlier than expected, or wish you had?
This content is provided for educational purposes only and should not be construed as individualized advice. Investment decisions should be based on an investor’s specific objectives, financial circumstances, and risk tolerance. All investing involves risk, including the possible loss of principal.
The hypothetical investors depicted are fictional and are not intended to represent any actual client experience or predict the results any investor may achieve. The examples should not be interpreted as a guarantee of future results or as a recommendation of any particular investment strategy. The examples assume a hypothetical 7% annual return, regular monthly contributions, and a long-term investment horizon. Actual investment results will vary and may be significantly higher or lower than those shown. The examples do not reflect the impact of advisory fees, transaction costs, taxes, inflation, investment expenses, varying rates of return, market declines, or changes in investor behavior, all of which can materially affect outcomes.
Investment Advisory Services are offered through Mariner Platform Solutions (MPS), an SEC-registered investment adviser. Kadmia Wealth and MPS are not affiliated entities.
