Why Timing Matters if You Want to Build Wealth!

Investing and compounding growth are concepts that are widely understood and appreciated by many. However, one aspect that is often not emphasized enough is the impact of timing on financial decisions. In this blog post, we’ll explore why timing matters when it comes to wealth building, and how your spending habits can have a significant impact on your financial future.

First, let’s make one thing clear: when we talk about timing in this context, we’re not referring to the timing of investment purchases and sales. Instead, we’re talking about the timing of your spending habits, or your consumption behaviors.

We have a great case study to share that illustrates this point. When I was in my 20s, I had a vision of quitting work at 50, even though I was already a hyper accumulator. However, my life has changed so much since then. When I was 16, I had another vision that was even crazier. I discovered that car insurance for young men was sky-high from ages 16 to 25, but as soon as they turned 25, it dropped significantly. I decided that when I turned 25, I was going to buy a Corvette to reward myself and exploit this arbitrage opportunity.

However, when I actually turned 25, I realized how ridiculous this idea was. This is a great illustration of how our younger, less wise selves often make decisions that our current selves would never consider. But, it also highlights the importance of timing when it comes to wealth building.

The average age of a Corvette buyer is not 25, but 61. The average MSRP for a 2023 Chevrolet Corvette convertible is $73,395, which represents 123% of a 25-year-old’s net worth if they are in the top 10% of net worth for their age range. On the other hand, a 61-year-old with a net worth of $2.5 million, who is in the top 10% of net worth for their age, would only be spending 3% of their net worth on a Corvette.

This is a clear illustration of how the timing of spending can have a huge impact on the long-term success of your wealth building efforts. It’s common sense that spending 123% of your net worth on a car at the age of 25 is not a wise financial decision, while it makes much more sense for a 61-year-old to consider such an expense.

In conclusion, the timing of your spending habits can have a significant impact on your financial future. It’s important to consider this aspect when making financial decisions and to avoid being swayed by society’s whispers about the “fabulous life” of consuming. Instead, focus on common sense and what makes the most financial sense for your current stage of life and net worth.