I really wanted to title this post “How $1 = $8,000 (or 4 Adorable Puppies)”, but I thought it might be a bit confusing 🙂
The #1 most frequent response I hear when talking about retirement savings is: “I don’t make enough money.”
If you make literally zero money, you are right. Bookmark this post and come back when you start earning!
For everybody else: if you have an income, you make “enough” money to save for retirement. If you have $1 to save every week, you make enough. Let’s have a look at these numbers:
If you dedicate $1 a week to retirement, that’s $52 saved by the end of the year.
Invest that $52 in an index fund that earns 6% interest annually, and in 12 years that $52 will turn into over $100. Just by leaving your money alone, it will double in value.
In 40 years—about when you’ll retire—that $52 will be worth over $500. Put another way, by retirement age your dollars will be worth ten times their present value.
What can $1 buy you today? A slice of cheap pizza? A happy hour shot?
Now imagine yourself in your 60’s. You saved $1/week for 40 years, and those dollars earned 6% interest annually. Your total contributions add up to about $2,000 over 40 years, but their value at retirement age is much higher. Even your more recent contributions that didn’t have as much time to grow are still worth more than their original value.
By saving $1 every week for 40 years at 6% interest, you’ll have more than $8,000 by the time you retire.
- $8,000 is a dream vacation to Italy, flying first class and staying at 5-star hotels.
- $8,000 is a home renovation project (Jacuzzi tub, anybody?).
- $8,000 is four adorable golden retriever puppies.
All because you set aside $1 each week.
What could be better than retiring with four puppies to keep you company? No, seriously—what would you spend that $8,000 on? Let me know in the comments!
P.S. Grab your free ebook: How to Win at Money in Your 20s