Your Plan To Becoming a Millionaire by 65

Your Plan To Becoming a Millionaire by 65

A visualization of how compounded interest over your lifetime can help you reach your long-term financial goals, and how waiting to get started can cost you hundreds of thousands of dollars over the years.  

In Millennial Money Tip#1 we discussed your two advantages when it comes to investing which are TIME and COMPOUNDED INTEREST. If you missed it then you can click here to learn the basics of getting started in investing. 

Today's post is meant to give you a visual of how compounded interest over your lifetime can work for you, helping you reach your financial goals even if your goal is to become a millionaire by 65. It can also show those of you who are starting out a little later in the game that even though you have less TIME to let your money accumulate & gain compounded interest (like the snowball in Millennial Money Tip#1) you can still create a sizeable sum of money for yourself.

For the purpose of today's discussion we'll compare the lifetime investments of five different women: a 24 year old, a 34 year old, a 44 year old, a 54 year old, and a 60 year old to see how their investments differ from one another.  

24 year old-01-01.png

In the above chart you have an example of someone who began investing at the age of 24 years old.

As you can see from looking at the above chart, her plan was to start out contributing $100/week for the first 10 years. This amount could reflect that this individual is either paying down debts or student loans, or perhaps they are starting out in their career. As she payed down her debts and began to progress in her career she was able to increase her weekly contributions gradually over the years. 

During the 40 year period she managed to invested a total of $603,220 which thanks to COMPOUNDED INTEREST over TIME made her $791,435 in interest, for a grand total of $1,394,635.

Did you catch that? She put in $603,220 but walked away with 1.3 million dollars. This is the beauty of Compounded Interest over TIME.

Now let's look at the next women who started investing 10 years later at the age of 34 and see what a difference 10 years makes...

34 year old-01-01-01-01.png

In the above chart you have an example of someone who began investing at the age of 34 years old.

As you can see from looking at the above chart, her plan was to start out contributing $150/week for the first 10 years, gradually increasing her weekly contributions over the years as she payed down pre-existing debts and found ways to earn more money. 

During the 30 year period she managed to invested a total of $550,200 which thanks to compounded interest over time made her an additional $494,850 in interest, for a grand total of $1,046,050.

So although her weekly investment contributions were higher than the 24 year old investor, she had 10 years less TIME. In the end the 34 year old investor had invested $550,200 and walked away with 1.04 million dollars. 

Now let's look at the next women who started investing at the age of 44 and see what a difference 20 years makes...

44 year old-01-01-01-01-01.png

In the above chart you have an example of someone who began investing at the age of 44 years old.

As you can see from looking at the above chart, her plan was to start out contributing $200/week for the first 5 years, $350/week for another 5 years, and then continuing to increase her weekly contributions until the age of retirement. At the age of 65 this individual decided to continue to work for an additional 5 years until the age of 70, but chose to reduce her weekly contributions down to $125/week to account for either health care expenses or perhaps partial retirement. 

During the 25 year period the 44 year old investor managed to invested an impressive $505,700 which made her an additional $498,817 in interest, for a grand total of $1,004,517. 

You may be asking yourselves "Now wait a moment Tara, you're telling me that although the 45 year old had 10 years less time than the 34 year old investor she still managed to make more interest in less time. How is that possible?"

Notice how in the beginning the 44 year old investor invested $200 and then increased the amount right away to $350 all within the first 10 years? By investing more heavily in the beginning she earned more compounded interest in the first ten years than both the 24 year old and 34 year old. Looking back at the snowball in Millennial Money Tip#1, a bigger snowball in the beginning means that it will increase in speed and size more quickly. 

So to recap, the 44 year old investor invested more heavily in the beginning which thanks to compounded interest turned her $505,700 investment into 1 million dollars. 

Now let's look at the next women who started investing at the age of 54 and see what a difference 30 years makes...

54 year old-01-01-01-01-01.png

In the above chart you have an example of someone who began investing at the age of 54 years old.

As you can see from looking at the above chart, her plan was to start out contributing an aggressive $550/week for the first 5 years, increasing that amount to $600/week until the age of retirement at 65 years old. At the age of 65 this individual also decided to continue to work for an additional 5 years until the age of 70. 

During the 15 year period the 54 year old investor managed to invested an impressive $345,800 which made her an additional $236,296 in interest, for a grand total of $582,096. 

The 54 year old investor much like the 44 year old investor started out investing considerably large amounts, which helped her to make more money in interest despite the reduced number of years. 

So to recap, the 54 year old investor invested more heavily in the beginning which thanks to compounded interest turned her $345,800 investment into $582,096. 

Now let's look at the next women who started investing at the age of 60 and see what a difference 36 years makes...

60 year old-01-01-01-01-01-01.png

In the above chart you have an example of someone who began investing at the age of 60 years old.

As you can see from looking at the above chart, her plan was to start out contributing an aggressive $550/week until the age of retirement at 65 years old, which was only 5 years away. At the age of 65 this individual also decided to continue working for an additional 5 years until the age of 70. 

During the 10 year period the 60 year old investor managed to invested an impressive $189,800 which made her an additional $88,276 in interest, for a grand total of $278,076.

Although she started investing much later than our other investors, the 60 year old investor still managed to take advantage of 10 years of compounded interest and turned her $189,800 investment into $278,076. 

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In all of the five examples, did you notice how the longer each women waited to get started, the higher their weekly investments needed to be, and the less money they walked away with in the end? 

Perhaps your long-term financial goals are not to retire a millionaire by 65, and perhaps your investment plan will look much different from the above examples. This is to be expected as our financial goals and circumstances will always vary from one person to the next.

To help you visualize what your long-term savings would look like, I've made a worksheet to help you plan it out (Microsoft Excel required). Just enter in your weekly investment amounts and watch your money grow.

Click here to get your Long-Term Savings Worksheet. 

My hope is that you will see that you don't need to win the lottery (or some other crazy & unlikely event) to create wealth for yourself. Creating a plan, following though on the plan, and sticking to it will bring you amazing results. 

If ever you find yourself struggling to stick to the plan I'm here to help. My goal is to support you so that you can get to where you want to be. Schedule a free consultation to discover how. 

Wishing you a prosperous journey. Tara

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