Build Wealth without Even Noticing
Contributed by Alan Haft
Fab & Fru contributor and financial adviser Alan Haft has a few painless tricks to help you find a way to stash some savings away each month. If saving $100 per month doesn’t sound like it could equate to much, think again. Over time, even small savings can multiply into big bucks. Read on and find out how!
Saving for retirement is not always easy. There are bills to pay, clothes to buy, movies to see and a long list of many other things that can easily get in the way. Without infringing on all the fun, I do few ideas on how to save $100 per month and jump start your way to building your wealth.
Let’s suppose you invest $100 every month, and let’s also assume you invest it into a stock index fund, (a mutual fund or exchange-traded fund that aims to replicate the movements of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions) that earns an average return of 8% per year. Before revealing the results, note the emphasis on index fund. This is important to highlight because when investing in an index such as the S&P 500, not only do you get instant diversification, but you’d also keep the fees you pay and the taxes you owe to a bare minimum.
Let’s also suppose the amount you save increases by 3% per year to keep in line with a hopeful increase in wages. So, invest $100 per month in an index fund such as the S&P 500, and at an 8% average rate of return, the following would result:
|IF YOU INVEST FOR…||…YOUR INVESTMENT WILL GROW TO…
Looks good to me. Here’s a few creative ways to help you get there:
- Invest Your Refund: Are you one of the unlucky people to get a tax-refund this year? Remember, your tax refund is merely an overpayment of estimated taxes or withholdings that earned Uncle Sam interest, not you… If you were one of the unlucky people to receive a refund, evaluate your estimated taxes or with holdings and don’t give it to Uncle Sam as a tax-free loan. Instead, invest it. Doing so could very well get you that $100 monthly savings you’ve been looking for.
- Brown Bag It: Working? Let’s suppose you eat lunch out every day and the average meal costs $12. That’s $240 per month in food costs. To save money, you don’t have to eliminate dining out every day! Try cutting down your daytime dine out to once a week. By doing so, you can bring your total monthly lunch costs to about $50. Of course, you still have to feed yourself. So let’s assume you spent about $100 for some groceries. Do the math, and there you have it – you’re left with a $100 dollar monthly savings. | Print
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