Updated: Jun 6, 2020
An Expensive Car Now or a Million Dollars Later?
Perhaps you think the difference between a full-sized car, a fully-equipped vehicle and a compact car is only about $10,000. Actually, it is more like a million dollars. Consider this: Borrowing $25,000 for a new car over four years will cost about $634 a month, while borrowing just $15,000 will cost only $381 a month.
If you saved the difference of $253 each month for 35 years, and if we assume that the money is earning an 8% average rate of return, (which is slightly less than the equity appreciation rate over the last 35 years), then your dollars would swell to $580,352.
While this sounds fantastic, there is actually even more potential for growing this savings when you consider the earnings associated with withdrawing the funds during retirement. If you invested in a fixed indexed annuity, for example, between ages 65 and 90 you would get monthly payments of $4,479 from that sum, which adds up to a whopping $1.3 million.
This is the magic of compound interest. However, it is not retroactive, one must save now to enjoy the benefits of compound interest in the future.
Read more at Fox Business https://www.foxbusiness.com/features/is-your-lifestyle-worth-a-million-dollars