How Long Until I’m Wealthy?

By in Asset Allocation, Automatic Saving, Bond, Investing, Stocks, Wealth

“Cash confiscates capital. Long term, after taxes and inflation, the return on cash is negative.” Catherine Keating

Since my mid-20’s, I made financial net worth goals for our family. I’d calculate our current net worth, add additional savings, and punch in an expected rate of return over the period, usually five to ten years. Occasionally, I go back and review prior goals. No matter what the market, over the long term we have met or surpassed the objectives. Set financial goals, make a few minor lifestyle changes and you may be surprised that you can become wealthy without a major upheaval in your lifestyle.

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Learn how long it takes to meet or surpass your financial goals. When you have an idea of how long it takes until you’re wealthy at certain savings levels, you’ll feel better. 

Wondering how long it takes until you're #wealthy? Find out here.

Here’s how certain wealth building parameters will play out.

How Long Until I’m Wealthy – Assumptions:

I’m not going to lie, life is all about trade-offs, and if you’re unwilling to compromise and give in order to get, then financial security may not be in your future. 

The good news is, although difficult at first, if choosing low-cost alternatives or cutting out indulgences a habit, it will be difficult in the beginning. But, I promise, that if you commit to making a few changes now in your saving, spending and lifestyle, your future will be better financially. 

When you hit the supermarket, do you go through and buy without price checking? If so, you can save thousands of dollars each year by simply watching the unit cost on the label and buying products with lower unit costs. When you eat out do you regularly order drinks and dessert? Cut out more expensive items and save. Clarity app will help you cut unwanted subscriptions and cut spending easily. It’s a snap to download and makes maximizing your money fun.

There are many ways to save, and actually, you can make it a game, by challenging yourself to meet certain goals. 

Before you find out  how long it will take to build wealth for your future, we’ll create a few assumptions:

  • Save monthly.
  • Auto transfer cash from your paycheck into savings and investing accounts. You might consider saving in your 401(k) at work and another investment account outside work as well. Maybe even set up a simple automated investment program with WiseBanyan or another low-fee digital advisor
  • Divide investments among stock (60%) and bond (40%) mutual or exchange traded funds. The historical average annual return of 60% stock funds and 40% bond funds is 7.4%. To be on the conservative side, I’m going to assume an annual return for this portfolio of 7%.

Obviously, these are assumptions, you may want to invest in a different way to suit your risk tolerance or age better. Your asset allocation depends upon many factors. Yet, if you’re curious about various savings amounts and how they’ll translate into future wealth with a 7% return, check out this chart. 

How Long Will it Take Until I’m Wealthy?

At an annual return of 7% per year, how long until you are wealthy?

How Long Until I’m Wealthy?      
7% return/year      
  20 years 30 years 40 years
$100/month $37,721 $121,997 $242,481
$500/month $260,463 $609,985 $1,312,407
$800/month $416,741 $975,977 $2,099,850

 

If you save $100 per month, in 40 years you will have $242,481.00. Increase that to $800.00 per month and you’ve got over 2 million dollars after 40 years investing.

Drop your monthly investment to $500.00 and invest for 30 years. You still wind up with a nest egg of over $600,000.00. Not bad.

Empowerment-It’s in Your Hands

There are no guarantees in life but regular savings and investing will definitely make you wealthier than spending!

Finding the balance between spending and saving leads to pleasure now and financial security in the future.

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Barbara Friedberg Personal Finance teaches wealth building skills. Pay attention, be patient, don’t overspend on stuff that doesn’t last; save, invest, and you can become rich. Take action to hit your wealth target.

A version of this article was previously published.