According to wikipedia, the median household income in 2006 was just over $48,000 a year. So, let's just say this is your average lifetime salary and you saved 10% before tax (with 401k, IRA, savings account, whatever) every year. Finally let's also say you were getting 6% interest compounded monthly, and you did this from the time you are 40 to 65 (or 25 years).
$48,000/year -- putting $4,800 away a year -- that's only $400 a month
After 25 years, just from 10%, you will have $269,657 in your account!!
BUT if you started early, say at 25, and put away $4,800 a month till you are 45 and then added NO MORE MONEY when you turn 65 you will have over $595,000!
Talk about the power of compounding interest!
Showing posts with label rich. Show all posts
Showing posts with label rich. Show all posts
Friday, June 6, 2008
Thursday, June 5, 2008
Interest
Interest...MAKE IT WORK FOR YOU!!!
This right here has caused more people to go bankrupt and many other to become filthy rich.
Let's say you max out your $1000 credit card, then just pay initial minimum payment of about $25 dollars at 18%(nominal, I'll talk about this later). If you continue just paying the initial minimum of $25 it will take you 62 MONTHS to pay it off!!!
You would owe the credit card company for over 5 years.
But in turn if you start saving that $25 a month, at 6% interest compounded monthly, at the age of 25 and continue until you want to retire at 65 you would have around $49,800 in the bank from that!!!
So like those people helping Ethiopian kids, if you will give less than one dollar a day (but to yourself) you will have about 50 grand in the bank after 40 years.
This right here has caused more people to go bankrupt and many other to become filthy rich.
Let's say you max out your $1000 credit card, then just pay initial minimum payment of about $25 dollars at 18%(nominal, I'll talk about this later). If you continue just paying the initial minimum of $25 it will take you 62 MONTHS to pay it off!!!
You would owe the credit card company for over 5 years.
But in turn if you start saving that $25 a month, at 6% interest compounded monthly, at the age of 25 and continue until you want to retire at 65 you would have around $49,800 in the bank from that!!!
So like those people helping Ethiopian kids, if you will give less than one dollar a day (but to yourself) you will have about 50 grand in the bank after 40 years.
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