Wednesday, April 7, 2010

Compound Interest

I have been saying how you can start investing with just $20 a month. Want to see what that $20 a month will do for you over the years? (if you continue to invest $20 a month and re-invest the dividends/interest)

$20 a month at just 5% (conservative in the market - AT&T or Verizon stock alone gives a 6% dividend)
In 5 years, you can have $1391
In 10 years, you will have $3151
In 20 years, you will have $8309
and finally in 30 years, you will have $16803

and all for only $20 a month - I love how compound interest helps you grow exponentially - that is why you leave the money alone, and let the dividends/interest re-invest!

Now lets say you can make the average 8% rate of return on that $20 a month (that is probably a more accurate average, as long as you don't play it too safe)
5 years - $1509
10 years - $3727
20 years - $11,957
30 years - $30,224

So if you wonder how you can possibly squeeze $20 out of your budget each month, think of something you can get rid of and remind yourself that in 30 years, you could have $30,000+ just from that measly $20!

This is also a reason to keep costs REALLY low, as not to eat into your profits!

So what if you can manage $50 a month? Well at 8% here is what you could have -
5 years- $3772
10 years - $9319
20 years - $29,839
30 years - $75,561

You can calculate the amount you think you can save a month and the possibilities from savings each month here

Enough motivation to find the money? Well, tomorrow's post, I will show you how most of you can EASILY find that $20 a month (for most of you it will be more like $40-50!) and it does NOT include you cutting any spending! It is also one of my pet peeves.. So check back tomorrow and I will show you the easiest way to get this extra money a month without cutting back your spending! I will also be giving other hints as this blog evolves ;)

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