They say the first $100,000 is the hardest. Believe it. It takes the longest amount of time to get to when you start investing because it’s the longest hill to climb.
After you get through this hurdle, the rest is a lot smoother sailing.
The trick is to save consistently over time and to not cash out.
If you invest $5,500 annually or its equivalent of $458 per month, then you can have $100,000 dollars saved in ten years with an investment return of 8 percent.
Basically, you would need to max out your Roth IRA or contribute to a company 401(k).
You could have even more invested if you get a match.
The Rule of 72. You can determine how long it will take your investment to double by taking the number 72 and dividing it by the interest rate.
Years required to double investment = 72 ÷ compound annual interest rate.
For the example described above that would mean 72/8 = 9. Therefore, it would take 9 years for your $100,000 to become $200,000.
Getting over the hump. This takes time. Once you start to save, then you have to commit.
There are no easy routes or shortcuts. The path to wealth is a journey. It truly is a marathon and not a sprint.
Build $100,000 in retirement savings by age 40
| Build $100,000 retirement savings | |||
| $100,000 | account | ||
| Starting Age | Daily savings | Monthly savings | Yearly Savings |
| 20 | $5.48 | $167 | $2000 |
| 25 | $9.59 | $292 | $3500 |
| 30 | $17.81 | $542 | $6500 |
| 35 | $43.84 | $1333 | $16000 |
| Greenbacksmagnet.com |
Make saving a priority and you can amass huge sums of money just by slashing expenses.
The biggest expenses by far are housing, transportation, and food.
If you can move into a smaller home, sell your car, and live off rice and beans you could save a small fortune.
Be that as it may, I would still suggest starting with a budget you could live with so that you will not feel so deprived.
The reason for working on the goal of saving $100,000 is to have this in principal and let compound interest do the rest of the work for you.
Since you have already done all the heavy lifting of saving a hundred grand, now you can concentrate on other goals you may have in addition to saving for the future.
Here is some food for thought: $100,000 over 30 years at an 8% rate of return can grow (thanks to the magic of compound interest) into $1 million dollars!
That’s right. You’re a millionaire. Now when they ask who wants to be a millionaire you can say your well on your way!