W.I.T. #54 - Triple Your Money in Just 10 Years!
Time is the "secret" that creates uncommon wealth.
Three Things Worth Sharing
McCheapest: With talk of inflation still top-of-mind, one way to measure is using a universal staple…like the Big Mac.
Hollywood’s best-paid actor of 2023: Apparently, there’s no such thing as too much of this person. I would never have guessed in a million years.
What matters: “What matters isn’t being applauded when you arrive—for that is common—but being missed when you leave.” – Baltasar Gracián
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VIDEO TRANSCRIPT
John Scherer:
How can you triple your money in just ten years? That's what I'm thinking about.
I've been thinking a lot recently about compound interest for some reason and some of the readings I've been doing, and conversations with clients as we go through our spring progress meetings. And I came across a graphic here recently that really exemplifies or puts a real solid point on this concept that I've been talking about a lot this spring. So I'll pull up a snippet here. We can put a link to the full article in the show notes here. But what the context of this is, the purpose for this graphic is saying, listen, if you just save $100 a month and you were able to get 10% return on that money and you do it over a long period of time, what happens?
And so the authors of this article are talking about small but consistent investment, make a difference is absolutely correct. But what really caught my eye in this graphic is over on the right hand side. My eye had kind of jumped to the values at age 65 versus age 75. You know, it kind of jumps out and just take a look at that, right? Something around half a million dollars at 65. If you don't touch it, let it keep growing. You're at, you know, something like triple that in ten years. And just, of course, it's just math, right? That compound interest earns interest, but it's really graphic here.
And looking at how, you know, wealthy people actually get wealthy is by letting time take care of things, right? And you can skip back and take a look at from age 60 to 70, it's about the same thing, right? 300 to 900,000, from 50 to 60, from 100,000 to 300,000, right? And so as you think about those things, one, we talk about it a lot with folks as we get towards retirement. The biggest years, you've got your biggest earning years late in your career. But it's also when all that work you put in in your twenties and thirties and forties really starts to make a difference, right? And so you think about, if you're 50, put it in some different terms. If you're 50 and you've got something like a million dollars and you say, geez, I really feel like I need to have 3 million to retire. John: Well, give it ten years again, there's no guarantees. You get 10% return. That's a reasonable return, I think, over time. But, you know, you don't know that. But, and it's not exactly going to be, you know, triple your money sort of thing.
But there's significant growth that happens the longer you leave things alone. And similarly, think about retiring at 60 versus 70. We've been having conversations with folks recently about, hey, maybe I don't want this high stress job, the high power job I have right now, but I'm not exactly ready to retire if I can just make enough money to pay for my living expenses and not spend out of my portfolio, right? Let this money that, like it looked like on the graph there, let that continue to compound if I don't even save more, but I just leave it alone for another five years, another ten years.
John: Look at the type of thing that we're talking about here, right? That idea of just letting it grow and how rapidly that progresses. But it's in the second half of your life, right? In that first half, boy, you save money and it doesn't do very much. But in that second half, especially if you're thinking about getting into retirement, man, making enough money to pay all your expenses so you don't have to spend out of your portfolio for five or ten years can make a huge difference.
So that's what I'm thinking about today. As always, I'm interested in knowing what you're thinking about. If you're watching this on YouTube, drop a comment in the comment box or shoot me an email directly. And as always, thanks for watching.
John Scherer CFP® is a fee-only certified financial planner based in Middleton, Wisconsin. He has over 20 years of experience advising clients on personal tax, investment, and financial planning. You can reach him by email at john@trinfin.com.