If You Have $1000 In The Bank, DO THESE 5 Things!
There is no limit to how much you want, even a hundred trillion dollars is not enough,
because once you have the entire planet, you would want to go to mars.
You perfectly know who I am talking about ( Musk & Bezos).
On the other side the good news is that, once these people leave the earth, they will no
longer be on the Forbes list because the Forbes list considers people who live here on earth,
which means now you have a higher chance to be on the top of the Forbes list, but I think
the founder of LVMH, Bernard Arnault will take their positions because apparently, it
seems like you don't need to build a tech company to become worlds richest person.
All you have to do is sell overpriced handbags to people who make a lot of money but are
still dumb enough to waste all that money on overpriced handbags with a logo that literally
says.
I have paid 5K for this handbag that literally performs the exact same job that any other
handbag does that cost $10.
But you can't call them dumb because they are making so much money, but they could be
dumb because they're wasting that money on dumb things, so I will leave that question
for you to answer in the comment section below.
I didn't mean to offend anyone.
I just can't understand why anyone would pay 5 or 10K dollars for a handbag.
Maybe I am just not smart enough to understand that.
Let's get back to the question of this video, how much money do you need to retire.
Let's just be realistic.
10 million dollars? 100 million dollars? 1 billion dollars?
The answer is far from that.
in order to answer that question, we have to take a look at a few statistics.
In 2019, right before the pandemic, The Bureau of Labor Statistics said that the median personal
income is $35,977 or $61,937 for households.
But let's ignore the median and focus on the average household income, which is $87,864.
Of course, this number is not accurate for everyone because if you are in your 20s, you
need far less money compared to someone who is in their 60s who needs to pay a fortune
on insurance because with age comes health problems.
That's why guys if you want to save money, take care of your health and stop eating all
that junk food.
The next question is - how much do you have to invest in order to earn $87,864 every single
year without doing anything.
We are going to take a look at a few available options, and we will do the math.
If that number is higher or lower for you, you can just take that equation and use a
different number that suits your circumstances more accurately.
Don't be scared of the numbers we will talk about because at the end of the video, it
will all make sense.
That's why it's important to pay attention.
I get it.
It's not easy.
After watching 15-second TikTok videos, watching a 10 minute YouTube video seems like a 3-hour
movie, but I promise the value you will get from this video is far more than you will
from hours browsing Tiktok.
Have
you heard the phrase, never spend the principal, only spend the interest.
And that's the key to financial freedom.
If you have inherited 10 million dollars, let's say you invest it and get a 5 percent
interest annually.
That's half a million dollars a year.
For the rest of your life, you can confidently spend $500K or $41,666 dollars every single
month for the rest of your life, and your wealth won't even decrease by a single penny.
That's way better than splashing that 10 million dollars in one single year.
But the key question - since the average household income is $87,864, how much do you need to
invest to make that much money every single year?
For the sake of this example, We are not going to take any risky investments such as Crypto
or individual stocks such as Tesla or GameStop.
We are going to be ultra-conservative and take something super stable, something that
historically has proven to grow by a decent percentage like the S&P500 that grows by around
10 percent a year.
10 percent out of $878,640 is $87,864, the amount that we are looking for.
This means if you manage to invest $878,640, for the rest of your life, you can spend $87,864,
and your wealth will remain the same, but the problem is, how do you save $878,640?
when the average household income is $87,864.
That's literally saving every penny you earn for 10 straight years, which is impossible
for most people.
And that's the average which means, people who are in their 20s do make anything close
to that.
And that's where the magic of compound interest comes into the picture.
Let's say you are 21 years old, you are about to graduate and looking for a job, but luckily
you have saved 1K dollars.
Whether your partied less, avoided cool Starbucks coffee or you were single during your college
days.
That's one of the benefits of being single, but does it worth it?!
Anyways, let's assume you will invest that amount into the S&P500 and completely forget
about it.
You are not going to Withdraw it next September when the new iPhones comes up or when you
have no money left to hang out with your friends.
You will live as if you have never had that money at all.
And every single year, till the time you retire, you commit to invest 1K dollars into the SP500.
When you retire at 66, you will end up with 863,685.80 or $86,368 every single year.
By saving just a thousand dollars a year, you have built wealth that worth almost a
million dollars and generates $86,368.
That's why Einstein once said: "Compound interest is the eighth wonder of the world.
He who understands it, earns it, he who doesn't it, pays it!"
I know that waiting for 45 years sounds like a really long time, but we also took a very
small amount of money.
Saving 1K is not a big deal for most of the people who are watching this video.
We can take a more extreme example where you could save 3 or 5K dollars a year, and you
won't have to wait for 45 years to rip the rewards of compound interest.
Let me in the comments section below, how much are you willing to invest a year?
But not everything is sunshine and rainbows.
While in theory, it's possible to get a 10 percent rate of return, in practice, it gets
slightly more complicated.
The inflation rate in the US is around 2 to 3 percent, which means if you don't want the
real value of your investment to decrease every year by 2 or 3 percent, you should not
withdraw more than 7 percent of your investment.
On top of it, if you want your investment to grow by at least a small margin, like 2
percent, you are left with just 5 percent.
So, if you want to be able to withdraw $87K dollars and be confident that inflation won't
wipe out your wealth over time, you have to invest double that amount or 1.7 million dollars
or 2K dollars every year instead of 1K dollars, which is still reasonable for most people.
If you check out the fire community on the internet, you will find endless examples of
how people lived frugally for 5, 10 or 15 years and saved the vast majority of their
earnings but eventually became financially independent.
You don't have to go that extreme because life without work is boring, so you can pursue
this strategy as a backup plan in case if things go south.
But, you probably have a million questions about how that is possible.
I get it.
I was once in your position.
And to answer all of your questions, I have created a course that simple, straightforward
and fully animated.
I have literally answered almost all of the questions you have in your mind.
I strongly recommend it if you are serious about investing.
It will not just teach you how to invest in index funds but teach you how to analyze stocks
and read financial statements, and at the end of the course, you will have to complete
an assignment that I will personally check, and the best part of it is that you can get
2 weeks of Skillshare premium if you use the link in the description and get the course
for free.
So don't miss it.
But what certainly have to keep in mind that you should not do anything with your money
unless you have covered your credit card debts first.
If your credit card has an annual percentage rate of, say, 20%, that doesn't mean you get
charged 20% interest once a year.
Depending on how you manage your account.
That's because interest is calculated on a daily basis, not annually, and is charged
only if you carry debt from month to month.
So it doesn't make sense to aim for a 10 percent rate of return while you have a debt with
20 percent interest.
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Thanks for watching and until next.