Are you familiar with the term FOMO? It stands for Fear Of Missing Out. It’s the feeling you get when your friends go out for dinner and drinks, but you have to stay home because you are sick with a cold.
It’s not a great feeling, and eventually we all overcome the fear of missing out. Even still, just like missing out on a fun opportunity to get dinner and drinks with friends, not investing when you had the opportunity can leave you with FOMO.
How does FOMO apply to investing?
Let’s say 10 years ago (in August of 2009) you had $1000 sitting around in your bank account – disposable income that you could do anything you wanted with. Instead of investing it, you bought a brand new TV. Your old one worked just fine, but it wasn’t a plasma screen TV. For $1000 you bought a brand new plasma TV and couldn’t be happier.
Now it is 2019. 10 Years have gone by. You still own the TV you bought 10 years ago, but instead of being a top-of-the-line TV, the plasma technology is outdated, the screen is not pencil-thin, and it doesn’t have Wi-Fi connectivity nor streaming apps. You want to get a new TV with these features, but will now cost you $1800.
You’re probably thinking, “Okay, so what? Everyone buys a new TV every 10 years.”
Think back to your money mindset.
Who controls your money? You? Or are your financial decisions dictated by what others are doing with theirs. Just because your working television isn’t plasma screen, nor does it have the thinnest screen or brightest colors, is not always the best excuse to buy a new TV. Think longer term than that. Think bigger picture than that. Let your money work for you, not you for your money.
Let’s say instead of buying the plasma TV in 2009, you took that initial $1000 and invested it entirely into the S&P 500 Index. Keep in mind, this index is the most commonly used indicator of performance of the top 500 companies in the United States.
10 years later (of August of 2019), that initial $1000 would now be worth $3268. (See how I calculated that here). Kinda makes you feel like you missed out, right? In those 10 years, you spent $2800 on TV’s even though your TV worked just fine, and you missed out on $2268 dollars.
Still not convinced?
Let’s make it interesting then. Let’s say you put in your $1000 in August of 2009, and on top of that you also set aside and invested $100 each month for those 10 years. Your account value at the end of those 10 years is now $24,877. Yup, just shy of twenty-five thousand dollars.
Now you’re probably starting to feel some of that FOMO, no?
Tell you what, let’s get even more interesting.
Same situation as before, except your initial investment was 50 years ago instead of 10. You invested $1000, and an additional $100 dollars a month into the S&P 500. Your account balance in August of 2019 is $1,445,224.
Go ahead. Read it again.
One million, four-hundred forty-five thousand, two-hundred and twenty-four dollars. At this point, you’re probably safe to retire! Most people would feel like they are missing out knowing that, for such a small sacrifice, could become a millionaire. Put it this way – at the expense of $100 dollars a month, you can become a millionaire without having to think twice. It almost sounds too good to be true, right? Well, the numbers and data reveal the truth, and the truth is that your fortune is within reach, it just takes time and consistency to see it come to fruition.
Now come back to reality.
Investing $100 a month is actually not easy. It sounds easy, and it can be, but for many people it’s very hard. For some people, it’s as simple as lacking the extra $100 dollars a month in their paycheck. Maybe all you have left over is $25 dollars. But in reality what makes this concept so hard for most people is the lack of discipline, not the money.
Ask yourself, “am I disciplined enough to put away $100 dollars a month? Do I mind making a small sacrifice in my spending habits now to build my fortune for the future?” They are simple questions, but most people are unable to see the larger picture.
Your money mindset can build fortune and freedom
Who is in charge of your finances? Do you work for your money, or does your money work for you? $100 dollars a month is not a lot of money now, but it could be worth a fortune in the future. There is no limit to how much you can invest. The only thing limiting your fortune is the limit you set on yourself by not investing sooner. This is an investor’s greatest fear – not investing soon enough.