A Little Bit of Financial Hope (For those with less than HUGE incomes)

So I did a quick Google search to find some financial calculators which lead me to, believe it or not, financialcalculators.com

I played with several, and this one can really show you the power of compound interest. Let's talk about savings.

Once I am debt free my immediate goal is to contribute to a fully funded emergency savings fund, and then proceed to retirement and investments. As I was just playing around with some numbers I decided to use my current income, and I used 15% of my income as it would grow in mutual funds over the next 30 years.

Income 26,000.
15% of income: 3,900

I said that I had a starting balance of 1000 (that's what I'll open the FIRST mutual fund with when I get to that step)

What does the math say I'll have after 30 years of saving 15% of my (current) income?
"Based on your savings schedule, you will accumulate $511,532 over the next 30 years."

Half a million dollars.  Great!  And that's not even until I'm 65...that's until I'm...well I would say 58, but I'm not debt free yet.  Let's say that's until I'm 61 years old.

REMEMBER: That is saving 15% of my 26k salary! I certainly don't plan to only make 26 for the rest of my life! In fact I just picked up a second job, so I will make more starting THIS YEAR...but 15% on 26 leaves me a half a million dollars (well more than that) to retire off of.

Here's the better news: I can invest 3000 a year (unmarried) into a Roth IRA.  Meaning that at retirement I pull it out TAX FREE. Why? Because you pay taxes on the income you receive before funding the Roth IRA, so it grows tax free.  3000 per person per year, 6000 per married couple. (with incomes under 200k annually I believe)

If I put 3000 a year into my Roth IRA between now and 65? "

"At retirement your IRA balance could be worth $1,235,562."

I'm no financial adviser, but that looks suspiciously like I'm not only a millionaire at retirement age, but I also can live rather comfortably off the interest of that nest egg, you know $98,844.96 annually.

What's the point of this?  The point is that EVERYONE with an income under 200k annually has the opportunity to save 3k annually in a Roth IRA, and if you do, you too can retire a millionaire.

So why doesn't everyone do this?  Because they would have to have control of their income, and their output. They would have to stop spending every penny they have and then borrow thousands more.  That's why.  Because while it's a VERY SIMPLE THING to do it's very HARD to actually do.

But it shouldn't be.  It's only hard because we don't commit to a budget. Because we don't know what our money is doing or where it's going. But it is going, it's flowing right through our hands.

You can make a very simple choice: Watch where your money is going. Set up a budget to prevent money from going where you don't want it to go, and divert a bit of that extra found money (you'll find a lot of it trust me) into a Roth IRA.

I know I know, you're going to say "But Will, I don't have 3k to put into retirement, and if I did I would put it on X"  (X = mortgage, credit cards, student loans, car payments, plastic surgery etc) If that's the case, I would encourage you to look into setting up that budget and getting out of debt.  You're losing even more money paying interest on everything than you would be making by investing it.

Debt is BAD. Debt is not a tool.  Debt is paying the bank to borrow money you didn't have, and then paying them back a LOT MORE for that privilege.

Get out of debt. Invest in the simplest and best forms for your future and your retirement.  I'll see you at retirement, I'll be the bald guy with the mile wide smile.