In this episode we will talk about:

 

  • How to figure out your current savings rate
  • How to increase your savings rate
  • Why would you want to increase your savings rate
  • Our strategy for consistently saving a huge chuck of our money each year
  • What is the minimum savings rate you should strive for

 

Example:

This example shows the power of compounding.  By starting early Sarah is able to amass over 1.2 million more than Will.  Even though her overall contributions were $25,000 less than Will’s.

8% YEARLY RETURN OVER 45 YEAR PERIOD
YEARS Will Sarah
1 0 0 $5,000 $5,400.00
2 0 0 $5,000 $10,832.00
3 0 0 $5,000 $16,698.56
4 0 0 $5,000 $23,034.44
5 0 0 $5,000 $29,877.20
6 0 0 $5,000 $37,267.38
7 0 0 $5,000 $45,248.77
8 0 0 $5,000 $53,868.67
9 0 0 $5,000 $63,178.16
10 0 0 $5,000 $73,232.41
11 0 0 $5,000 $84,091.01
12 0 0 $5,000 $95,818.29
13 0 0 $5,000 $108,483.75
14 0 0 $5,000 $122,162.45
15 0 0 $5,000 $136,935.45
16 0 0 $5,000 $152,890.28
17 0 0 $5,000 $170,121.51
18 0 0 $5,000 $188,731.23
19 0 0 $5,000 $208,829.72
20 0 0 $5,000 $230,536.10
21 $5,000 $5,400.00 $0 $248,978.99
22 $5,000 $10,832.00 $0 $268,897.31
23 $5,000 $16,698.56 $0 $290,409.09
24 $5,000 $23,034.44 $0 $313,641.82
25 $5,000 $29,877.20 $0 $338,733.17
26 $5,000 $37,267.38 $0 $365,831.82
27 $5,000 $45,248.77 $0 $395,098.37
28 $5,000 $53,868.67 $0 $426,706.24
29 $5,000 $63,178.16 $0 $460,842.73
30 $5,000 $73,232.41 $0 $497,710.15
31 $5,000 $84,091.01 $0 $537,526.97
32 $5,000 $95,818.29 $0 $580,529.12
33 $5,000 $108,483.75 $0 $626,971.45
34 $5,000 $122,162.45 $0 $677,129.17
35 $5,000 $136,935.45 $0 $731,299.50
36 $5,000 $152,890.28 $0 $789,803.46
37 $5,000 $170,121.51 $0 $852,987.74
38 $5,000 $188,731.23 $0 $921,226.76
39 $5,000 $208,829.72 $0 $994,924.90
40 $5,000 $230,536.10 $0 $1,074,518.89
41 $5,000 $253,978.99 $0 $1,160,480.40
42 $5,000 $279,297.31 $0 $1,253,318.83
43 $5,000 $306,641.09 $0 $1,353,584.34
44 $5,000 $336,172.38 $0 $1,461,871.09
45 $5,000 $368,066.17 $0 $1,578,820.78
Will Sarah
Total Contributions $125,000 $100,000
$368,066.17 $1,578,820.78