close up photo of survey spreadsheet

It is commonly accepted that the earlier you start investing, the longer time horizon your investments will have to grow exponentially (compound). The power of compounding saves you the burden of having to put more principal into your savings and investments. Yet, why do so many have trouble getting started or have not gained traction?  In this article, I offer some explanations and share my personal experience.  I will drive home the point, using a compound interest calculator.

Human Psychology

Much of why many people fall behind on saving and investing has to do with human psychology; I fully recognize that the comments in this section do not apply to those who are struggling to meet basic needs, and investing may be the last thing on their minds.  That is understandable and I will try to be helpful without being insensitive. 

Reason #1Humans tend to avoid or delay pain in favor of instant gratification.  Saving and investing are inconvenient, if not painful for some.  For others, over-consumption gets in the way of saving and investing. This is why the savings rate in the U.S. is very low, and for years, behavioral economists and consumer advocates pushed for legislation to force employers to automatically enroll their employees in 401K and similar plans.  The U.S. Census Bureau estimates that in 2021, 59% of employees were eligible to have a 401K plan, but only 32% participated.

Reason #2Fear and Greed.  Investors, especially inexperienced ones, tend to overreact during times of distress and uncertainty (war, recessions, pandemics, etc.). This leads to panic selling.  On the other hand, during good times, they tend be “irrationally exuberant”, using Nobel-laureate economist Robert Shiller’s phrase (later made famous by former Federal Reserve chairman Alan Greenspan). This is why bubbles form, encouraging excessive risk taking, followed by severe losses in the ensuing crash. 

My Experience

I took advantage of time being on my side.  I remember Warren Buffett saying that when he was 10 years old, he figured that if he lived long enough, his investments would compound enough to make him a very wealthy man.  I took that to heart.  Even though right out of college, I had a negative net worth, overwhelmed by debt, living expenses, supporting my parents, and saving for my future, I made sure to contribute 5% of every paycheck to my retirement account.  I was fortunate enough to have a stable, average- paying job that matched my contributions.  Every time I got a raise, I increased my contribution by at least 1%. 

Key Takeaway:  I contributed at least 5% of every paycheck to my retirement savings early in my early 20s.  Over the next 25 years,  the investments grew exponentially, giving me financial independence in my 40s.

If your employer does not provide a retirement plan (401K, 403b, 457, etc.), there are other options, such as a traditional IRA, Roth IRA, brokerage account, etc.   Advantages and disadvantages of these accounts are beyond the scope of this article.  You can own any or all of them, in addition to having an employer-sponsored retirement account.  Over time, I’ve owned all of them.

I was consistent.  The key to success in most disciplines is consistency.  The words of my high school tennis coach, Mr. Martinez, still ring in my ears today.  What wins tennis matches is consistently making good shots, not the Andre Agassi-type, ESPN-highlight-worthy shots (we couldn’t make those consistently like Andre could). 

This principle worked well for me in investing, and for many others.  I let the professional traders and excessive risk takers do the day trading, while I consistently contributed to my accounts; small amounts of money were automatically transferred from my bank account to my investment accounts regularly.  This is what Warren Buffett meant when he said that you should pay yourself first.  

I visualized success.  I didn’t just imagine it. I planned it.  I ran simulations on spreadsheets.  This allowed me to make adjustments to my contributions when necessary.  I always added more when I could, especially when the market was down.  Below, I am sharing my compound growth calculator.  Feel free to save it to your Google Drive, and run the simulations yourself.

The first tab, ‘Historical Examples’, contains historical annual rates of return on four Fidelity mutual funds from 1992 to 2020.  These funds are examples of one broad index fund and three sector funds focused on technology, biotechnology, and healthcare stocks.  I have no association with Fidelity nor am I sponsored by them.  The examples assume that, through 4 boom and bust cycles (recession of 1991-2, tech bust of 1999-2000, financial crisis of 2008, and Covid-19 in 2020), consistently contributing $6,000 per year in these representative funds would yield a portfolio value between $1.7 and $2.3 million.

Of course, this is hindsight. History doesn’t repeat itself exactly, which is why I created the second tab, ‘Simulations’.  This looks to the future (2022 to 2050), so many assumptions and guesses have to made.  This is helpful for visualizing possible outcomes, especially if you are now starting to invest or unsure if we’re in a bubble that is about to pop.  There are four scenarios with different assumptions and outcomes.  For all scenarios, I’m using the FDGRX fund, which invests in growing companies (appropriate for young investors with long time horizons).

Scenario 1:  this is the baseline scenario where nothing changes (still contributing $6,000 per year and getting the same returns in the same pattern as historically).  The final outcome is, in 2050, your portfolio will be worth $2 million.  This is the most optimistic scenario that is unlikely to repeat itself.

Scenario 2:  this is less optimistic, assuming a moderate downturn for the next six years, but having the same recovery pattern as historically.  Still contributing $6,000 per year, your portfolio will grow to $1.5 million by 2050.

Scenario 3: even less optimistic than Scenario 2, assuming a moderate downturn in the next six years, but having a weaker recovery throughout, and still contributing $6,000 per year.  In 2050, you end up with a portfolio worth $355,000.

Scenario 4:  worst-case scenario, suffering severe losses in the next six years,  followed by a weak recovery throughout.  But, realizing this, you increase your contributions from $6,000 to $10,000 per year until 2050, ending up with a portfolio worth $500,000.  This outcome is better than Scenario 3, where you did not make adjustments to your contributions.

Key Takeaway: Spreadsheet simulations help us to visualize a range of outcomes, and empower us to make adjustments in order to achieve a desired outcome.

Feel free to copy this spreadsheet to your own Google account and tweak it to your liking.   As the years pass, you can update each year with actual returns.  This is what I do every January.


As the saying goes, a journey of a thousand miles starts with one step.  If you haven’t started, I encourage you to take the first step.  Visualize success.  Be fearless.  Build confidence.  Find financial zen.