Maybe your parents told you. Maybe you read it somewhere. Regardless, old Ben Franklin disclosed the secret over 200 years ago when he said quite simply “Spend less than you earn.”
“Oh” you groan, “that’s easy for you to say! How could I possibly do that on my income?” Well, what if your income was $100 less per month? Let’s say you put $100 per month under your mattress for the next 45 years. Would you have enough to retire in comfort? How does $54,000 sound? Not enough, right?
On the other hand, what would happen if you put only $100 per month in an investment account, and invested it wisely at 15% for 45 years. You’d have set aside the same $54,000, but how much would it have grown. Do you think you could live comfortably on $6,572,308.94? That’s how much cash you would have in your investment account at age 65!
The difference between retiring in poverty, and retiring independently wealthy, is your ability to spend just $100 per month less than you do right now. Spend less than you earn - it’s that simple.
Now, let’s carry the idea a step further. Say that each year you get a $100 per month raise, and instead of spending all of it, you put aside 25% of each $100 increase. Think! Couldn’t you be just as happy with a $75 raise? You’d never miss the other $25, would you.
Well, here’s what that little $25 add-on to your investment fund will do for you. Over 45 years, you would have saved only an additional $13,200 - but it would have grown to a whopping $1,426,875.09 - for a total of $7,999,184.03!
Back to your question “How can I possibly save $100 a month on my income - and with my expenses?” It’s simple IF you’re willing to make the necessary commitment to spend less than you earn. If you have a real job - one where you are employed by another - ask them to deduct $100 from your monthly check (or $25 from your weekly check) and direct deposit it into your “investment” account. If you are self employed, you’ll need the backbone and discipline to pay yourself $100 in a seperate check and immediately deposit it into your “investment” account.
As you probably know, bank accounts do not pay the needed 15% return on your money. That means you’ll also need to learn how to invest your ever increasing “nest egg” wisely. I’ll cover that topic in my next “factoidz” article entitled “How to grow your “nest egg” by 15% a year!”
