Here is a great little java script calculator for figuring out how much money you can make by investing money at an early age. Play around with the calculator and see for yourself. As you will see, starting your retirement investment at age a few years earlier can make multi million dollar differences at the age of your retirement.
It is easier for me to tell you that investing is very important now that I have some disposable income that I can allocate toward my retirement. After playing with the retirement calculator you will see, as I did, how important it is to start early. If you have $1,000 to invest, and you add nothing to that investment (at age 25), and assume a 12% annual increase, when you retire at age 55, your investment will have grown to over $16,000. If you start 5 years earlier, your investment grows to over $26,000! Timing is critical. If you put that same $1,000 into a 12% investment at age 18, it will turn into a $32,000 by age 55! This calculator is considering inflation too! So, a $1,000 television purchased at age 18 could have been a new convertible at age 55 if you saved it.
There are many variable that you will not know, like the estimated annual gain on your investment, so it is probably better to underestimate here if you are unsure. Let's say you want 2 million dollars available when you retire. You need to start investing at age 25 if you want to retire at age 55. Invest $10,000 a year until you are ready to retire, at an interest rate of 12.7%. 2 million is yours!
Want to know what the best gift is to get for a grand son/daughter? If you give them a $2,000 IRA at their birth, and when they go to retire at age 55, they will have over $340,000!!! That is why it is so important to start early. This web page is great food for thought. Play around with the calculator and see for yourself.
Who wants to be a multi-milionaire?
You've made the first step to becoming a millionaire. You're reading this article! If you play the lotto regularly, then you are throwing away money. The odds of becoming a millionaire by gambling are a long shot at best. I can guarantee you will become a millionaire, unless there is a global catastrophe that destroys the world economy.
I promise you will become a millionaire if you follow these general rules:
Take advantage of 401k and IRA.
Start early. When you are 45, you will be glad you did.
get the best percentage rate for interest on your credit card as you can.
Pay off high debt. Especially at high interest rates. Credit card debt is the worst because it is often over 16% APR.
Be patient. The first years of saving only reap you a couple thousand in rewards. The last years will reap you hundreds of thousands in rewards.
Be risky!!! If you are young, use it to your advantage. You can get a big leap over everyone else by succeeding in a risky stock. As you get more money and you get older, you can get more conservative with your investments.
As hard is it may be, hold off on buying that expensive new toy so that you can contribute to your IRA or other saving plan.
I will now illustrate for you how you can become a millionaire in several ways:
Low income, medium risk
With a total of only $4000 invested annually, and in extremely safe investments, you can retire as a millionaire in exactly 29.1 years. This is the worst case scenario. You can invest more and at higher risk (higher reward).
| cumulative totals: | 401K or IRA $2000 a year at 15% |
Mutual Fund Investing $1000 at 10% |
Certificate of Deposit $1000 at 7% |
| year 1 | 2000 | 1000 | 1000 |
| year 2 | 4300 | 2100 | 2070 |
| year 3 | 6945 | 3310 | 3214 |
| year 4 | 9986 | 4641 | 4439 |
| year 5 | 13484 | 6105 | 5750 |
| year 6 | 17507 | 7715 | 7153 |
| year 7 | 22133 | 9487 | 8654 |
| year 8 | 27453 | 11435 | 10259 |
| year 9 | 33571 | 13579 | 11977 |
| year 10 | 40607 | 15937 | 13816 |
| year 11 | 48698 | 18531 | 15783 |
| year 12 | 58003 | 21384 | 17888 |
| year 13 | 68703 | 24522 | 20140 |
| year 14 | 81009 | 27974 | 22550 |
| year 15 | 95160 | 31772 | 25129 |
| year 16 | 111434 | 35949 | 27888 |
| year 17 | 130150 | 40544 | 30840 |
| year 18 | 151672 | 45599 | 33999 |
| year 19 | 176423 | 51159 | 37378 |
| year 20 | 204887 | 57275 | 40995 |
| year 21 | 237620 | 64002 | 44865 |
| year 22 | 275263 | 71402 | 49005 |
| year 23 | 318552 | 79543 | 53436 |
| year 24 | 368335 | 88497 | 58176 |
| year 25 | 425586 | 98347 | 63249 |
| year 26 | 491423 | 109181 | 68676 |
| year 27 | 567137 | 121009 | 74483 |
| year 28 | 654208 | 134209 | 80697 |
| year 29* 1st million | 754339 | 148630 | 87346 |
middle income, high risk
Investing a total of $13,000 will be difficult at the beginning, but as your income grows and you add a spouse's salary it will become very easy. You get your 1st million in 14 years, and your 5th million in 21 years. Start early! It is better to have your first million when you are in your thirties than it is when you are in your fifties.
| cumulative totals: | 401K or IRA $10,000 a year at 25% |
Mutual Fund Investing $2000 at 25% |
Other stocks $1000 at 15% |
| year 1 | 10000 | 2000 | 1000 |
| year 2 | 22500 | 4500 | 2150 |
| year 3 | 38125 | 7625 | 3472 |
| year 4 | 57656 | 11531 | 4993 |
| year 5 | 82070 | 16414 | 6742 |
| year 6 | 112587 | 22517 | 8753 |
| year 7 | 150734 | 30146 | 11066 |
| year 8 | 198418 | 39683 | 13726 |
| year 9 | 258023 | 51604 | 16785 |
| year 10 | 332529 | 66505 | 20303 |
| year 11 | 425661 | 85132 | 24349 |
| year 12 | 542076 | 108415 | 29001 |
| year 13 | 687595 | 137519 | 34351 |
| year 14* 1st million | 869494 | 173898 | 40504 |
| year 15 | 1096868 | 219373 | 47580 |
| year 16 | 1381085 | 276217 | 55717 |
| year 17* 2nd million | 1736356 | 347271 | 65075 |
| year 18 | 2180446 | 436089 | 75836 |
| year 19* 3rd million | 2735557 | 547111 | 88211 |
| year 20* 4th million | 3429446 | 685889 | 102443 |
| year 21* 5th million | 4296808 | 859361 | 118810 |
The graph below demonstrates your earning potential (using data from table #2). As you can see, the last few years are the most important.
