Saving vs Investing: $300 to 1.6 Billion
I want to talk about saving and investing because if you want to start investing you must be able to save first.
There’s a number of financial mistakes that people make in their lives. And one of the most serious mistakes is that they don’t understand saving and investing.
One thing to cover first about saving:
Saving won’t make you richer.
Let’s take a look at the situation.
For example you’re making $2000 a month.
You start working at age 25 and you decide to retire at age 65.
So you’re working period is about 40 years.
Assume that you won’t have to spend your salary, your income, on anything.
And this literally means you can save 100 percent of your income.
So with the average income of $2000 a month if you keep working hard in 40 years and save all your money, you’ll be able to make a maximum of nine hundred and sixty thousand dollars. You would almost be a millionaire.
But the fact is that saving 100 percent of your income is simply impossible.
That’s because you’ll have to spend a lot on housing, food, apparel, transportation, your entertainment, your family’s vacation, your children’s education, health care services, Social Security, your insurance, charities and a lot more.
So with an average income of $2000 a month you will never be a millionaire OK.
Now let’s take a look at another situation so you can see exactly how investing can help you get wealthy without any extra effort.
Assume that your income is still $2000 a month.
But in this case you decide to save a small percentage of your income.
For example $300 a month to invest.
Assume that you start investing at age 25 and continue to invest $300 a month until you retire at age 65.
With only 10 percent annual return from the stock market you’ll be able to turn your 300 dollar investments into a $1.6 billion.
In 40 years.
Let’s compare that with the previous case where you have to work really hard and try to save all of your money in 40 years.
As you can see for the same number of years and with small investments of only $300 a month you can easily double your net worth.
Build a satisfying retirement and retire wealthy with a millionaire status.
So how can we turn small investments of $300 dollars a month, into 1.6 million dollars?
We can actually do so, thanks to the amazing power of compound interest.
Compounding is the wonderful way in which you can earn money — not only on the original amount of your investment, but on all of the money that the principle amount earns along the way.
Money makes money. And compounding exponentially increases the amount of money your investment earns.