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Sometimes it helps to look at the Big Picture. It is easy to get caught up in the day to day spending of money and loose sight of the overall plan. Wouldn’t it be fun to take a quick look at what your assets well invested will be worth in 5 or 10 years? Take 1 minute to follow this link to do just that.
In the middle of the page click under Retirement Calculators click on “How fast will your savings grow?”
I like round big numbers and lots of zeros. The more the better so I put in $1 000 000 under how much you have and $50 000 for how much you will save. The tax rate is likely around 33% for someone saving that much so I put 33% and 0 for state tax since I happen to live in Texas. Pretend this is a taxable account so skip the next section. I put in 8% for a very realistic average annual return and hit the calculate button. Talk about motivation to invest well and save! The $1 000 000 grew into $2 540 000 in just 10 years. By going back and increasing the return to 10% it grows to $2 900 000 which we could round up to $ 3 000 000 just for fun.
Now for the real punch…Go back and remove the amounts in the Taxable account and put it in the Tax Deferred section. At the lower 8% annual gain the $1 000 000 grew to $5 420 000. What a difference!
Spend some time here and enter your information. Challenge your self. Tape the projected amount some place where you will see it often to keep you moving toward your goal. Write out a plan. Think about what you can do with the projected earnings. Trips abroad a meaningful charitable contribution or leaving a legacy are all possibilities.
Finally let’s make a few conclusions here.
- The more money you save and or earn the more money you have to compound.
- Compounding money is awesome.
- Invest wisely. There is not a lot of time involved in producing an average 8% return a year other than financial knowledge and consistent and committed oversight of your assets.
- It is good to have a plan regarding your money complete with expected projections and a regular review of that plan.
- Tax deferred accounts expedite the growth of your money and make good sense for a portion of your assets. Care must be taken here as many tax advantaged assets have high fees and limited investment choices.
- You should move to Texas!
To your Prosperity