3 min read
If you invested $10,000 every year in the S&P 500 from 2000 to 2017, you would have accumulated just over $477,000, assuming you reinvested all dividends.
Here’s how much you would have accumulated if you consistently invested $10k, $20k, $30k…up to $80k each year.
Fun fact: You needed to save just over $20k each year to accumulate at least one million dollars during this time frame.
The two charts above assume you invest the same amount each year. However, as you get older, your income will likely increase and you’ll have more money to invest each year.
Let’s see how much you would have accumulated if you increased your investment amounts by 3% each year. For example, in year one you invest $10,000. In year 2 you invest $10,300. In year 3 you invest $10,609…and so on. Each year you invest 3% more than the previous year.
Here’s how much you would have saved if you invested $10,000 in 2000 and increased your investment amounts by 3% each year through 2017:
Just by increasing the amount you invested by 3% each year, you would have come out ahead by $84,000.
Here’s how much you would have accumulated by increasing the amount you invested by 3%, 5%, 7%, and 9% each year:
It’s incredible how much more you could have accumulated through consistently increasing the amount you invested each year.
If you managed to increase your investment amounts by 9% each year, you would have ended up with more than double the savings compared to just investing the same amount each year.
This is the math that supports the idea of banking your pay raises and unexpected windfalls instead of using them to splurge. By consistently saving each year, you’ll do fine over the long run, but if you’re able to increase the amount you invest each year, compound interest will become even more powerful.
To dramatically increase your savings over time, invest the majority of your annual salary increases, bonuses, and any unexpected windfalls. This will have an incredible impact in the long run.
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