4 ms·
I can't find a way that $500 per month adds up to "multi-million dollar net worth". Even at a very optimistic 10% return rate, it comes to just over 1.1 million
by CamTin 9y ago
I can't find a way that $500 per month adds up to "multi-million dollar net worth". Even at a very optimistic 10% return rate, it comes to just over 1.1 million over thirty years. What assumptions are you making in your calculation to come up with 2million+ at retirement from $500 per month of savings?
- gimmeDatCheddar 9y ago$500 a month is $6000 a year. $6000 a year invested from 26 to 66 at 10% interest per year is $2,921,110.87. At 12% it's $5,154,854.34. Keep in mind this is just from a single decision the average person is making.
- wombatpm 9y agoAnd isn't that 10% and 12 % growth assumption the reason all pensions are in trouble?
- phinnaeus 9y agoJust for clarification, where is 10% interest coming from? Mutual funds? 401k? Something else? Serious question, I am not financially knowledgeable but I know you'd never get 10% interest in a savings account (for example).
- gimmeDatCheddar 9y agoMutual funds / index funds / real estate
- amvalo 9y agoWTF kind of fairy land is this? 10% is already a dream, but at least it's a round number, unlike the 12% you just arbitrarily threw out there.
- ummonk 9y agoSo you're expecting people to make 10-12% in after-inflation returns?
- gimmeDatCheddar 9y agoMaking 7 to 10 percent after inflation is possible and it is sufficient to amass more than 1 million dollars by retirement just from changing this one habit. The point was that the average financed car is worth a massive amount in opportunity cost.
- CamTin 9y agoOk so you're assuming 40 years instead of 30. That's where the discrepancy is. Thank you for clarifying.
- gimmeDatCheddar 9y agoYep. You can also assume 45 years if someone starts working at 20 and retires at 65.
- dtech 9y agoNot many places offering 10% ROI to people who can invest $500 a month.
- gimmeDatCheddar 9y agoSo invest it as $6,000 per year. Doesn't have to be $500 per month.
- rconti 9y ago... and how is spending $0 on transportation a reasonable solution, anyway?
- wehadfun 9y agoIt's not. Even if you walked to your job. The additional money you would pay in rent / time / uber is not worth it. Just buy a car unless you live in an actual pedestrian city.
- ThrustVectoring 9y agoIn order to finance a dollar of monthly spending, you need roughly $300 invested. Actual returns are generally somewhat higher, due to requiring a lower amount of variance to handle sequence-of-returns risk in distribution, but the rule of thumb holds. Which suggests the car-buying habit puts you roughly $150k in the hole.