One of the most puzzling things about money is knowing where to begin. You get out of college and suddenly find yourself in the real world, with a job, with rent, with student loans, and wonder how you’re going to make ends meet, let alone save for retirement. Retirement seems so far away. It’s easy to just forget about it.

Ignoring retirement could be one of the biggest financial mistakes you’ll ever make. Compound returns favor the young. Time is money. Invest now and your 40-year-old self will be grateful. But where do you start?

Frances Leonard’s 1995 book, Time is Money, is an excellent introduction to retirement for people in their twenties and early thirties. Leonard preaches the important message: start now.

If you start soon enough, your dinky little monthly investment will take care of your golden years. You won’t have to worry about retirement for the rest of your life. The hundreds of dollars per month that late starters need to save for retirement will be all yours — yours to do all the things you’re dreaming about, instead of having to deny yourself all the good things just because you missed your best chance to amass a fortune mostly made of money you’ll get for free.

At the heart of this book is Leonard’s “four steps to a fortune”, a simple program which, if followed, can enlist time as an ally to help you build your retirement nest egg. The four steps are:

  1. Find your number. Time is Money provides several tables to help you determine how much you need to save now in order to retire with the money you need. For example, if you’re 27 years old and believe you can achieve a 10% investment return, then you need to save $143 each month for the next forty years in order to have a million dollars upon retirement.
  2. Invest at 10 to 12 percent. This may seem like a rosy assumption, but over the long-term, the U.S. stock market has offered these sorts of returns. The key, says Leonard, is to invest in an index fund.
  3. Invest in a tax-deferred account. Taxes can take a huge chunk out of compounded returns. Take advantage of tax-deferred retirement accounts and other breaks. (This book was written before the advent of Roth IRAs. I believe Leonard would now advocate putting your money into a Roth first.)
  4. Protect your fortune from inflation. Leonard recommends that at the beginning of each year, you track down the Consumer Price Index from the year before (free from the government), and adjust your monthly contributions by that amount. Using the $143 example cited earlier, if prices have risen 4%, then the new contribution would be roughly $149/month.

Time is Money features chapters on mitigating risk, types of retirement accounts, fighting inflation, starting from “zero minus” (i.e. a position of debt), and more. There’s a great chapter that defines financial terms like annuities, derivatives, and leverage. (Stay tuned to GRS in April for a series that will help to de-mystify financial concepts like these.)

This book is a clear introduction to the power of compound returns, and offers strong motivation to begin saving now, no matter how old you are.The only major drawback is that it’s twelve years old. Because it was published in 1995, it doesn’t have information on Roth IRAs and other recent developments.

If you’re just out of school and looking for guidance to set up retirement savings, this is a great place to start. Look for it at your public library, a local used book store, or from Amazon (which has 25+ used copies for under five bucks).

(While preparing this review, I found that Nickel wrote about Time is Money two years ago. He liked it too, calling it the: “personal finance book that forever changed the way I think about money.”)