Okay, so I wake up today with a hideous credit rating. I've emailed my card company and told them I'm canceling and will be making arrangements to pay off my balance.
And then I thought, this is crazy, I can't do this for the rest of my tax-paying life. If I can afford, so the gov't says, to give 20% of my yearly hard-earned pay to the gov't as taxes, then I hope to Midas that I can pay myself 10% annually. Ok, so there's that. I realize I was writing my resolutions in advance.
Anyway, 10% annually is not that bad. Hmmm. Well, from zero, no from negative, to 18,000 savings a year is definitely not bad. But I'm a dreamer and a slacker, so I want to retire by age 50, as in not lift a finger by age 50 type of retirement. That's 18,000 * (50-24) = 468,000. If I plan to live another 30 years after 50, then that's a mendicant living of 1,300 a month. Not very much worth living for.
So I get all boiled up and crazy, searching the web for solutions. Tah dah! Mutual funds! For a very can do away with amount of 5,000 initial investment and succeeding 1,000 deposit every now and then, you can earn an annual average of something a little over the inflation rate, let's say 11.8%. That's important because inflation rate means your peso today is worth dust in ~12 years, if the rate is 8%.
Ok, so on the first year that's 5,000+(1,000*12)=17,000*(1+11.8%)=19,006!!! On the first year you've earned 2,006, which you can withdraw minus the rate (around 3%) that the bank or the processing company charges for withdrawals. Anyway, let’s cut the math, I’m not even sure if it’s precise, although it was fun figuring it out. On the 22nd anniversary of your investment, you would’ve become a millionaire, it would have grown into 1,075,224.66, and over the course of those 22 years, your total withdrawals would be 824,273.66. If I’m 24 by January, plus 22 years, I can retire by age 46 ^_^
But let’s say I get a raise and I can afford NOT to withdraw the monthly earnings. I just keep depositing 1,000 every month and forget about it. Well, that makes me a millionaire by the 21st anniversary of my investment, a whopping 1,121,427.46
Ok, maybe I did the math a bit wrong but the whole point of it is, 5,000 initial investment and 1,000 every month… Come on, that’s less than what we pay for taxes! I say if we can give the gov’t 20% of our pay, we can give ourselves 10% back each month. It’s not as instant as winning our first million on a game show, but neither is it as embarrassing nor as having such a statistically low probability and it’s definitely worth it. And if a writer can figure this much out, so can you.
