Grief and Compound Interest~ Time is the key.

Today I said something I never thought I would say… I said “it gets better over time”. I made this comment to my mom as she grieves over my aunt’s passing last week. 

Why was I so shocked these particular words came out of my own mouth? Because today also marks the date of Gerhard’s and my wedding anniversary.

I remember the empty feeling I had during those passing weeks and months after his death. I also remember thinking how stupid the morons telling me this same thing were. How could they possible understand what I was feeling? How could they guarantee things would get better over time? It all just sounded like some psycho-babble they had come up with because they couldn't think of anything else to say. Just some words to fill the dead air time in our conversation. I remember thinking what a crock of crap these few little words meant. Individually they were fine, but collectively, and forming this particular sentence, they sounded absurd. How could time possibly have any effect on the grieving of a loved one?

As time passed, however, things did get a little better each day. The crying fits became shorter in duration, and more spaced out in frequency. As more time passed I only got bummed out on the special occasions. It isn't that I have forgotten about Gerhard, or loved him any less, just that life goes on. My grieving would not bring him back, it was only holding me back.

As luck would have it, I found myself in the office this morning (I had taken this day off the last two years), not crying, not saddened, but thankful. Thankful for what I have, not remorseful for what I lost. So yes, I guess those morons were right… Time does make things better. I have moved on, found happiness again (at the time I thought was an impossible challenge), and am enjoying life. It was a valuable, yet slow and painful, lesson to learn.

How does this relate to the financial world? Easy. Both grief and compound interest take a positive turn over the long run. Before we get too far into this analogy, for those that don’t understand how compound interest works it’s pretty simple. It’s basically earning interest on top of interest you've already received. Let’s say you deposit money into an interest bearing account, then when you received the interest payment or dividends in that account you leave it alone. So instead of your initial deposit (let’s use $10,000 for this example), you now have $10,025. The next time the interest is calculated, the current balance of $10,025 is used instead of the initial $10,000. This continues to increase as time goes on.

What true effect does this have on an account? If someone placed $10,000 into an account earning 3.5% annually, with no additional funds being contributed, at the end of 20 years the account balance would be a little over $21,100. (There are plenty of financial calculators out there. I used TheCalculator Site).

Mind you, this calculation was done without any new contributions. Making bi-weekly, monthly, quarterly, or annual deposits to your account will have an even larger effect. 

So whether you have recently lost a loved one, or just looking to increase your portfolio value, time is the key. While it seems like the pain will never end, take it from this moron…it will.

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"Image courtesy of  ddpavumba, published on 04 January 2013 Stock Image - image ID: 100130602