Here’s What Saving 1% of Your Paycheck Could Do…

Saving money is difficult. Even saving 1% of your paycheck can be a challenge. However, this percentage can have a huge impact on your ability to retire or become debt-free.

For example, let’s say you are 25 years old, make $40,000 a year today, and never get a pay increase from that salary. 1% of that would be $400 a year / $33.33 a month / $7.69 a week. To save this amount it could mean eating out one less time a week, skipping buying a few articles of clothing a month, skipping one night on the town a month, or many other options.
So, instead of spending that one percent of your paycheck you invest the money in the stock market.
On average the stock market has a return of 8% per year, or 10% if you
reinvest the dividends. Dividends are a sum of money paid regularly (typically quarterly) 1 percent returnby a company to its shareholders out of its profits (or reserves). Assuming you get a 10% return on your investment, by the time you are 65 the 1% you save monthly would be worth roughly $195,000. All from 1% of your paycheck.

 

Conversely, waiting until later in your life to start to invest it will not be as rewarding. Saving $33.33 a month starting at the age of 40 (still 25 years until 65 years old) will only get you a return of $43,000 when you are 65.

1 percent return #2

Evening doubling the amount you are saving to $66.66 a month from ages 40-65 at a 10% average yearly return you will only have $86,536. Much less than the $195,000 by starting younger.

 

Being a millennial means we have lots of time for our interest to compound and our investments to grow. Even starting small now will have can have a huge impact in the future.Automating a portion of your paycheck to a different account will make saving even easier.

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