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Is Your Lifestyle Worth a Million Dollars?

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.

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