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Which matters more for building wealth: Your saving rate or your investment returns?

January 27, 2023 by Brett Tams

My name is Zach, and I write at Four Pillar Freedom, where I tend to tackle financial topics through data visualization. While J.D. is on vacation, I offered to explore one of his favorite topics: the effects of saving rate versus investment returns.

Albert Einstein supposedly once said that compound interest is the eighth wonder of the world.But does data actually support this claim?

In this post, I explore the nature of compound interest, how long it takes to become an important factor in wealth accumulation, and whether or not it actually matters much for people who hope to achieve financial independence in a relatively short time.

What matters more: your saving rate or your investment returns?

Accumulating Wealth in the Early Years

Suppose your goal is to achieve a net worth of $1 million. If you invest $10,000 every year and earn a 7% annual return on your investments — which is a reasonable assumption for long-term stock market returns — you’ll accumulate $1 million in about 30.7 years.

The chart below shows exactly how long it would take to reach every $100,000 net worth milestone, using the assumptions of a $10,000 annual investment earning a 7% annual return:

Notice how each $100,000 net worth milestone takes less time to reach than the last. In fact, it’s mind-boggling to see that it will take youlongerto go from $0 to $100,000 than it will to go from $600,000 to $1 million:

The first $100,000 takes the longest to save because you don’t receive much help from investment returns early on. The time it takes you to go from $0 to $100,000 is mostly dependent on the gap between your income and your spending.

Posted in: Building Wealth, Investing, Retirement, Taxes Tagged: 2, All, asset allocation, before, big, buffett, build, building, building wealth, business, calculator, Compound, Compound Interest, compounding, couple, data, Early retirement, earning, environment, expenses, Fees, Financial Goals, financial independence, Financial Wize, FinancialWize, fire, freedom, gap, goal, goals, good, growth, heat, hold, household, Income, interest, Invest, Investing, investment, investment returns, investments, investors, job, jobs, journey, Life, low, LOWER, Main, Make, market, money, More, munger, net worth, News, Other, pinterest, rate, Rates, Real Life, retirees, retirement, returns, rich, right, save, Saving, saving rate, savings, Savings Account, single, Spending, stock, stock market, tax, The Stock Market, time, vacation, versus, warren, wealth, will, young

Betterment Review: The Original Robo-Advisor Service

January 27, 2023 by Brett Tams

Betterment offers the best combination of investment options, tax-loss harvesting and low fees of any robo-advisor – with no minimum investment requirement.

The post Betterment Review: The Original Robo-Advisor Service appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

Posted in: Investing, Money Basics Tagged: 2, 2021, advice, advisor, All, Alternatives, android, app, asset allocation, assets, ATM, balance, banks, barclays, basic, Benefits, betterment, blue, bond, bond funds, bonds, brokerage, brokerage firms, buffett, Buy, Capital Gains, capital gains tax, CDs, Checking Account, Checking Accounts, Children, codes, College, corporate bonds, cost, couple, cryptocurrencies, customer service, Debit Card, Debt, diversification, dividend, dividends, emerging market bonds, employer, employer-sponsored retirement plan, Employment, equity, ESG, estate, ETFs, expensive, FDIC, FDIC insurance, Fees, Financial advice, Financial Planning, Financial Wize, FinancialWize, fixed income, fund, funds, General, Getting Started, goal, goals, gold, good, Google, government, great, growth, growth stocks, household, household income, How To, improvement, Income, index, index fund, industry, Inflation, Insurance, interest, international, Invest, Investing, investing strategies, investment, investments, investors, iOS, iPhone, IRA, IRAs, irs, Life, Life Events, Long-term Savings, low, LOWER, Make, making, market, markets, marriage, mobile, Mobile App, model, modern, modern portfolio theory, money, Money Matters, More, Move, mpt, municipal bonds, natural, needs, new, novideo, offer, offers, Operations, opportunity, Original, Other, overdraft fees, passive, Personal, plan, Planning, Popular, portfolio, premium, principal, products, project, protection, quality, questions, rate, Rates, Real Estate, real estate investment, retirement, retirement accounts, retirement plan, Retirement Planning, retirement plans, Review, reward, risk, robo-advisor, robo-advisors, rollover, roth, safety, Saving, Saving for Retirement, savings, Savings Accounts, Schwab, second, securities, security, Sell, shares, short-term investment, single, smart, smart phone, stock, stock classes, stock market, stocks, Strategies, target, tax, tax rates, time, time horizon, title, tools, trading, traditional, Treasury, Treasury bonds, trusts, under, unique, value, value stocks, Vanguard, versus, visa, volatility, warren, will

How to Set Up a Trust: A Step-by-Step Guide

January 27, 2023 by Brett Tams

Learn how to set up a trust and make smart money decisions with this step-by-step guide for Gen Zers. Understand the tax implications, cost, and responsibilities of being a trustee.Learn how to set up a trust and make smart money decisions with this step-by-step guide for Gen Zers. Understand the tax implications, cost, and responsibilities of being a trustee.

The post How to Set Up a Trust: A Step-by-Step Guide appeared first on Money Under 30.

Posted in: Investing, Life Insurance, Money Basics Tagged: 2, 2022, 2023, advice, advisor, All, Amount Of Money, annuities, assets, Bank, bank accounts, basic, before, beneficiaries, beneficiary, Benefits, bonds, Budgeting, Capital Gains, charity, Children, cost, couple, creditors, death, estate, Estate Planning, estate tax, expenses, experience, Family, federal income taxes, Fees, fiduciary, filing taxes, Financial Advisor, Financial Planning, Financial Wize, FinancialWize, funds, get started, gift, gifts, goals, grantor, great, guide, health, How To, Income, income tax, Income Taxes, Inflation, Insurance, interest, intestate, Investing, investments, irrevocable trust, irrevocable trusts, Law, Lawsuits, Learn, Legal, legal documents, Life, life insurance, list, Live, living expenses, living trust, living trusts, LOWER, maintenance, Make, making, Managing Money, Medical, money, money decisions, More, mutual funds, needs, net income, offer, organization, Other, ownership, party, Personal, plan, Planning, policies, probate, property, protect, protection, questions, Rates, Real Estate, Regulation, retirement, returns, revocable trust, right, savings, School, security, smart, Smart Money, spouse, states, stocks, tax, Tax Advantages, tax returns, taxable income, taxes, time, title, tools, trust, trustee, trusts, under, will

How Do Negative Interest Rates Work? What They May Mean for Your Wallet

January 27, 2023 by Brett Tams

Imagine a world where the bank pays you to take out a loan. This is what’s known as a negative interest rate, and while it may seem counterintuitive at first, it can have economic benefits in a struggling economy. So, how do negative interest rates work? During an economic downturn, banks may turn to negative

The post How Do Negative Interest Rates Work? What They May Mean for Your Wallet appeared first on MintLife Blog.

Posted in: Financial Planning, Investing Tagged: 2, 2022, affordable, assets, author, Bank, banks, before, Benefits, big, Blog, Borrow, borrowing, Budget, Budgeting, Buy, buy a house, Buying, Buying a Home, car, chance, color, Commercial, cons, cost, covid, COVID-19, COVID-19 pandemic, Credit, data, decision, Earn money, earning, economic downturn, Economy, education, Federal Reserve, Fees, finances, Financial Goals, Financial Literacy, Financial Planning, Financial Wize, FinancialWize, goals, good, government, great, guide, home, house, Inflation, interest, interest rate, interest rates, investment, investments, job, layout, Learn, Life, loan, Loans, low, LOWER, Make, Make Money, making, Mint, mint.com, mobile, money, More, opportunity, Other, pandemic, payments, Planning, pros, Pros and Cons, rate, Rates, refinancing, rewards, save, savings, Spending, Spending Less, student, student loan, Style, time, title, tools, value, wealth, white, will, work, Zero-Based Budgeting

A Stunning Riviera Villa Offers Rare Direct Sea Access

January 27, 2023 by Brett Tams

A luxurious seafront villa in the Provence-Alpes-Côte d’Azur region of southeastern France is a unique property offering every luxury and convenience. The 6,727-square-foot home is situated right on the Mediterranean Sea at Anthéor, in between Cannes and Saint-Tropez. Listed by Carleton Group with the price-on-request, the property is a rate opportunity for direct sea access on […]

The post A Stunning Riviera Villa Offers Rare Direct Sea Access appeared first on RealtyBizNews: Real Estate Marketing & Beyond.

Posted in: Investing, Paying Off Debts Tagged: 2022, All, apartment, author, bar, Bathrooms, Bedrooms, Blogging, blue, Carleton Group, Children, Convenience, design, dining, Entertainment, estate, Europe, European villas, exclusive homes, exclusive villas, expense, Featured News, Financial Wize, FinancialWize, floor, French Riviera, garage, garden, Giving, gym, home, house, international, Investing, kitchen, library, Luxury, luxury lifestyle, luxury real estate, Marketing, More, Moving, natural, News, offers, opportunity, Other, outdoor, outdoors, pool, property, rate, Real Estate, Real Estate Marketing, Relaxation, restaurants, right, Riviera properties, second, shower, space, Sports, suite, summer, swimming, time, title, town, unique

What we talk about when we talk about risk

January 27, 2023 by Brett Tams

Everybody’s financial situation — age, income, saving rate — is different.

But every retiree, early or late, aspiring or actual, has the same, simple investing imperative: We must preserve and grow our purchasing power in real terms in order to finance decades of future consumption.

This sounds simple (which it is) and obvious (which it isn’t).

The Declining Value of Your Dollars

Let’s assume you’re forty years old. Every week, you buy a six-pack of your favorite microbrew for $10. You have $520 in savings that will buy you your weekly six-pack for all of 2019. Life is good.

Here, for instance, is GRS founder J.D. Roth with a $10.19 six-pack of his favorite beer, which he’s drinking while he edits this article:

J.D. with a six-pack of his favorite beer

Now, let’s assume that the cost of this six-pack increases by 3% annually — which is a reasonable estimate of inflation. Every year, your $520 in savings buys you 3% less beer.

In thirty years, when you’re seventy and still enjoying your suds, that six-pack that costs you $10 now will cost you $24.27, which is a $1,262 annual expense if you continue to buy a six-pack a week.

In other words, your $520 in savings has to increases by nearly 145% to $1,262 over the next thir[s]ty years to merely maintain — let alone increase — your current beer consumption.

It gets worse.

Even if everything goes according to plan and your beer money grows from $520 in 2019 to $1,262 in 2049, you’ll need to sell $1,262 worth of your investments to get the cash for your beer. That will trigger a $750 taxable gain, and at a 25% federal and state tax, you’ll have to pay approximately $188 in taxes. Your beer money is now approximately $1,074. This only buys you 44 six-packs of beer in 2049, whereas you were consuming 52 six-packs in 2019.

In other words, due to inflation and the taxation of nominal gains, you’ll be poorer, with a lower standard of living, thirty years from now.

This bears repeating: A 3% pre-tax return on your investments will not preserve, let alone grow, your current standard of living.

Posted in: Investing, Taxes Tagged: 30-year, All, asset allocation, assets, bond, bonds, Buy, Buying, chance, consumption, cost, Credit, data, decades, expense, Finance, Financial Wize, FinancialWize, goal, goals, good, government, Grow, hold, How To, Income, Inflation, Invest, Investing, investment, investment risk, investments, investors, Life, low, LOWER, market, money, More, net worth, offer, Other, plan, Planning, portfolio, principal, probability, Purchase, rate, Reverse, risk, roth, safe, Saving, saving rate, savings, Sell, simple, state tax, states, stock, stocks, tax, taxes, time, title, traditional, Treasury, united, value, volatility, wealth, will, work, working

Streaks and Skill

January 27, 2023 by Brett Tams

My thoughts on investing have shifted over the years. New ideas consistently challenge me and force me to question my assumptions. The biggest: is there skill in investing?

Posted in: Investing, Money Basics Tagged: 2, 2022, All, ask, baseball, BAT, ben, Blog, Books, buffett, business, Career, chance, Competition, confidence level, cost, data, decision, diversification, diversify, Financial Wize, FinancialWize, flipping, flips, fund, fund managers, funds, games, General, good, graham, great, Grow, guide, history, How To, ideas, impact, index, index funds, interest, Invest, Investing, Investing & Retirement, investments, investors, Law, Learn, learned, lessons, Life, list, low, Make, making, market, markets, math, MLB, More, munger, net worth, new, office, Other, passive, patterns, podcast, portfolio, probability, products, proof, rate, right, Sell, shares, simple, single, skill, smart, statistics, stock, stock market, stocks, story, streaks, The Stock Market, time, title, trends, trust, Video, voting, wall, warren, will, work, youtube, Zoom, zoom out

How to buy bonds: The ultimate beginner’s guide

January 27, 2023 by Brett Tams

   Bonds might be the missing piece in your portfolio. Here’s how to buy bonds, why you might need them, and what exactly to look for.Bonds might be the missing piece in your portfolio. Here’s how to buy bonds, why you might need them, and what exactly to look for.

The post How to buy bonds: The ultimate beginner’s guide appeared first on Money Under 30.

Posted in: Investing, Money Basics Tagged: 2, 2022, advisor, All, Amazon, app, asking price, bear markets, before, big, bond, bond funds, bonds, Broker, brokerage, build, Buy, Buying, chase, Choices, city, commission, company, Convenience, corporate bonds, data, diversity, dividends, earning, ETFs, Featured, Fees, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, fixed income, fund, funds, General, goals, good, government, great, Grow, growth, guide, hold, How To, Income, Inflation, interest, interest rate, interest rates, Invest, Investing, investments, investors, IRA, job, Learn, lending, lending money, Life, Live, loan, Loans, Local, low, Main, Make, market, markets, millennials, money, More, Move, municipal bonds, mutual funds, needs, new, offer, Other, ownership, payments, plan, Popular, portfolio, premium, principal, Purchase, rate, Rates, retirement, returns, right, risk, robinhood, roth, Roth IRA, running, savings, savings bond, schools, searching, Secondary, secondary market, Secondary markets, Sell, shares, simple, stock, stock market, stocks, The Stock Market, time, title, Treasury, Treasury bonds, under, value, Vanguard, volatility, war, will, work, young

Vanguard Sees Non-U.S. Equities, Emerging Market Bonds as Top Sectors in 2023

January 27, 2023 by Brett Tams

Vanguard has released its January 2023 investment and economic forecasts, and there are some interesting projections that all investors should consider. The forecast predicts faster economic growth in China than in the U.S. or Europe. When looking at investments, Vanguard … Continue reading →

The post Vanguard Sees Non-U.S. Equities, Emerging Market Bonds as Top Sectors in 2023 appeared first on SmartAsset Blog.

Posted in: Financial Advisor, Investing, Money Basics Tagged: 2, 2022, 2023, 429, advisor, All, apple, ask, assets, author, Banking, Blog, blueprint, bonds, Borrow, Broker, calculator, chance, Children, Choices, company, corporate bonds, cost, coupons, covid, Credit, data, Debt, decades, Digit, Economy, emerging market bonds, entry, equity, estate, Europe, expensive, experience, Featured, fed, Federal Reserve, Finance, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, fixed income, floor, Forecast, Forecasts, funds, games, get started, goals, good, Google, great, Grow, growth, growth stocks, home, impact, Income, index, Inflation, interest, interest rate, interest rates, interview, Invest, Investing, investment, investment portfolio, investments, investors, job, Learn, list, LOWER, Main, Make, making, market, markets, MBA, mobile, model, money, More, non-us equities, Other, Personal, personal finance, points, portfolio, project, projects, property, rate, Rates, ready, Real Estate, Recession, retirement, returns, right, risk, securities, stock, stocks, Style, target, the fed, tips, title, tools, traditional, Treasury, Twitter, U.S. Growth stocks, under, Unemployment, Utah, Vanguard, Vanguard projections, Venture Capital, volatility, weather, white, will, work

Answers to 7 Money Management Questions You’ve Been Asking

January 27, 2023 by Brett Tams

Answers to 7 Money Management Questions You’ve Been Asking Manage your money and boost your retirement fund. Money management takes time, patience and some knowledge. While you don’t need to be an expert, you need to understand a few things to make the best decisions and plans. Here are the answers to the seven most

The post Answers to 7 Money Management Questions You’ve Been Asking appeared first on MintLife Blog.

Posted in: Financial Planning, Investing, Personal Finance Tagged: 2, 2022, advice, All, author, baby, big, Blog, Budget, Budgeting, build, car, clear, color, Credit, data, Debt, Debts, education, Emergency, Emergency Fund, expenses, experience, Family, Finance, finances, Financial advice, Financial Goals, Financial Planning, Financial Wize, FinancialWize, freelance, fund, goals, Gurus, Income, interest, IRA, IRAs, job, layout, Life, Main, Make, Mint, mint.com, mobile, money, Money Management, money management questions, money management tips, money moves, More, Move, new, new job, Personal, personal finance, plan, pros, questions, retirement, retirement fund, retirement plan, right, roth, Roth IRA, Roth IRAs, Salary, save, Saving, Saving for Retirement, savings, Savings Goals, Software, stable, Start Saving, Style, tax, taxes, Technology, time, title, tools, traditional, traditional IRA, washing, white, will, work, young
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