The Easiest Path to Automatic Wealth

This is my shortest ever post, but possibly one of the most valuable.

I tell my kids to save as much as they can while they're young; before they're destroyed by our society's out-of-control consumerism.

I also tell them to pursue work that lights them up – whatever comes naturally to them and that they truly enjoy – not the kind that pays the most money. The reasons are two-fold.

  1. They don't need a high-paying job to become wealthy. They just need to employ good money habits.
  2. If they do work they love, they'll be happy most of the time and they'll never ‘work' a day in their lives.

So a while ago, I constructed a spreadsheet to illustrate what would happen if they saved $1,000 in their first year. Then a $1,000 more the following year, and so on.

So to explain, in year one they'd save a grand. The the next year, two grand, and the next, three grand.

Assuming a long-term average return of 7%p.a. (in a Vanguard index fund, for example), the results are quite alarming.

 

When You Start Matters Most

Also, to show them how important it is to start early (so compounding can work its magic), I included a few extra columns on the spreadsheet. These show with hard data, what happens if you wait five years before you start. Then ten. Then fifteen.

The punchline is this:

  • If you start at 15 years of age and do this for 40 years, you end up with $2,652,766.64 when you're 55.
  • If you wait 5 years and start when you're 20, you lose almost $1,000,000!
  • If you wait 15 years and start when you're 30, you lose $2,000,000.

 

I wish I knew this when I was a teenager.

And just about anyone should be able to do this. If you're smart about it, you'd squirrel away much more in the beginning, too, because that's where the real power is. Everything you contribute in the early stages gets the greatest benefit of compounding because it's in there the longest.

If you start off with $3k instead of $1k, and add $1,500 extra each year instead of $1,000, the outcomes improve dramatically. You'll reach $1M five years earlier, and after 40 years, you'll have almost $4.3 million instead of $2.6 million.

Teach this to your kids now. And if you're not doing it yourself, start today. It's certainly better late than never!

To get the full spreadsheet, with input fields for the starting amount, extra savings each year and the % rate of return, click here. It's free.

 

The $1000 Savings Calculator

Get the full spreadsheet, complete with input fields for the starting amount, extra savings each year and the % rate of return, here: It's free. 🙂

 

 

Other Resources

Blog Posts That Might Help

The Number One Key to Wealth
How to Die With No Regrets
The Halfway Mark
The Number One Rule From my 74yo Mum
You’re Already a Millionaire
Eliminate Crap from your Life
How it Feels to Live on Your Own Terms

The Tools I Use and Recommend

Tools and Resources for Solopreneaurs

Books Worth Reading

Choose Yourself – James Altucher
Unshakable: Your Financial Freedom Playbook – Tony Robbins

 

Thanks for stopping by and I hope we get to hang out more in the future. And in the meantime, please feel free to share your own experiences. You can email me directly at peter@midlifetribe.com. I respond to all emails. If this was beneficial to you, please consider subscribing and sharing with someone you think would also benefit. 

Disclaimer & Disclosure: I'm not a psychologist, and I'm not a financial advisor's elbow. This material doesn't constitute financial advice but rather a collection of personal opinions, based on my own experiences. Some of the links on my site are affiliate links, which means that if you make a purchase, I will earn a small commission. This commission comes at no additional cost to you. I provide links to services or products I have used and liked or researched and recommend. Please do not spend any money on these products unless you believe they will be beneficial to you


Also published on Medium.

Related Posts

Leave a Comment

Pin It on Pinterest

I've Decided to Stop Ageing | Midlife TribeThe Era of Fake Experts | Midlife Tribe