Search In This Blog

Thursday, July 25, 2013

Power of disciplined savings and compounding!


"Be decisive. A wrong decision is generally less disastrous than indecision" - Bernhard Langer.

How satisfied are you with your investment plan?

Does your plan take care of the medium term and long term requirements?

What are the consequences of you falling short of your needs at a later stage in life?

What if the long-term inflation is higher than your investment returns?

What if i told that with proper planning, you will only need to set aside half or even a third of what you would need to save ?

Target : $1Million at age 60.

Age Duration
Years
0% 4% 5% 6%
25 35 2,380 1,103 895 701
30 30 2,778 1,442 1,203 996
35 25 3,333 1,946 1,681 1,443
40 20 4,166 2,727 2,435 2,164
45 15 5,555 4,064 3,743 3,438
50 10 8,333 6,792 6,442 6,102

** - Returns above are probable returns for illustration purposes.

From the above table, you could see, you just need to set aside $700 a month if you start early and better manage your investments to make a Million Dollars at age 60. This works out to investment of only $294,000 but grows to $1Million because of disciplined savings, better money management and the power of compounding.

Target : $500 a month

Age Duration
Years
0% 4% 5% 6%
25 35 210,000 452,986 567,037 712,355
30 30 180,000 346,777 415,514 502,257
35 25 150,000 256,916 294,224 346,496
40 20 120,000 183,304 203,629 231,020
45 15 90,000 123,005 132,755 145,409
50 10 60,000 73,609 77,309 81,939

The table above explains the returns for a fixed amount of $500 instead of target of $1M in the first table.

Start early, Be disciplined, Actively manage money and let the power of compounding work in your favor.

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein


No comments:

Post a Comment