What if you could go from having $244,815 over 30 years to $906,222 over 30 years using one simple trick? You don’t need to earn a bunch more on investments, in fact you don’t even need to change your investments. All you need to do is increase your savings rate year after year.
You see, if you were 30 years old today and saved $250 per month for the next 30 years, all while earning 6% on your investments, you would end up with $244,815 in your investment account. Now, there is nothing wrong with that, but $906,222 sounds a lot better to me.
Here’s how you do it.
Once you are comfortable saving $250 per month, you probably don’t even really notice the payments any more. It’s just like a cable bill or cell phone bill coming out every month. Now, how hard would it be for you to increase that amount by $25 per month. I’m sure you can find a way to save an extra $25 a month somewhere.
You see, if you get used to increasing your savings every year, you can easily go from saving $250 per month to $700 a month over 10 years. The trick is to go slowly. Only increase your savings by 10% per year. The first year you save $250 per month, the next year $275, then $302.50 and on and on and on it goes. Trying to go straight from $250 a month to $700 a month will feel like a big hit, but slowly increasing your savings year over year will feel natural and easy.
The benefit? If you can increase your savings by 10% per year for 30 years, instead of having $244,815 in 30 years, you end up with $906,222.
It’s these little decisions in life that will put you ahead of everyone else.