Many consider a million dollars to be a good goal for retirement, though most people want much more. Does the thought of saving up a million dollars sound daunting to you? It should, because that would mean saving $25,000 per year straight into a bank account for 40 years. Thankfully there are other methods of accumulating a million dollars that don’t require you to have an extra 25k per year. With the help of the stock market, other alternative investments, and compound interest you can afford to only invest a little less than 5k per year and still retire as a millionaire.
One of my favorite sites is CalcXML, they have tons of handy calculators and this one shows the power of compound interest:
My assumptions were starting at $0 and for 40 years putting $5000 per year into investments averaging 7.5%. The trick is to start early and it only asks for $416 a month. With some planning and careful consideration, I think it’s possible to save upwards of $1,000 per month. It might take some side hustling or overtime, but it can shorten the time it takes to reach this benchmark.
Conclusion
Albert Einstein called compound interest the 8th wonder of the world. This example illustrates just how powerful it is. Are you saving enough? What can you do to increase the gap between your spending and saving? Maybe there’s some easy ways to decrease your spending or increase your earnings. It might take some sacrifice but it may be well worth it. Don’t assume it’s impossible and give up. You won’t get anywhere close if you don’t start somewhere. If you’re right out of college, figure out how to get started, 84% discounts don’t come around often.
