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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

A Day In The Life of my Supposedly Frugal Stomach

January 27, 2023 by Brett Tams

Kicking Ass with Money is much like healthy eating and joyful living. It’s a series of daily habits that get you ahead, rather than a one-time heroic effort that fixes all your problems so you can go back to whatever you were doing before. Because of this parallel, the subject of food is one of the […]

Posted in: Money Tips Tagged: 2, active, affordable, All, avocado toast, Bank, bank account, bar, before, big, Big Picture, Blog, Books, Budget, building, car, cents, Children, chocolate, Choices, Clean, coffee, construction, cost, data, Debt, design, diet, Early retirement, eco, efficient, energy, expensive, Family, financial independence, Financial Wize, FinancialWize, food, frugal, Frugality, General, good, great, grocery, grocery bill, Grow, habits, Happiness, health, healthy, heat, home, house, kitchen, Learn, Life, Lifestyle, low, Luxury, Main, Make, making, marriage, meal planning, mess, money, More, Moving, moving in, needs, new, office, opportunity, Other, Parenting, parents, Personal, pizza, plan, Planning, productivity, Purchase, quality, Raising a Family, ready, Recipes, restaurants, retirement, returns, rewards, right, routine, running, School, second, simple, single, space, Spending, story, Style, The MMM Blog, time, under, unique, value, versus, will, work, workers

Should I Rent a Car in Oahu?

January 27, 2023 by Brett Tams

Should I rent a car in Oahu? Great question. It might seem like booking a rental will give you the most freedom of movement, but it’s likely not worth the cost.

Posted in: Moving Guide, Travel Tagged: 2, 2021, 2022, 2023, adventure, All, all-time highs, app, Apps, art, assets, Bank, beach, best travel, Blog, brokerage, car, car prices, cars, Cities, city, company, cooking, cost, crafts, Credit, credit card, credit cards, currency, data, disney, driving, estate, expensive, Fees, Financial Wize, FinancialWize, food, freedom, friendly, games, garden, gas, gas prices, goal, good, Google, great, guests, hawaii, hilton, hotels, How To, industry, international, japanese, lessons, lists, Local, making, mobile, Mobile App, money, More, museum, nerdwallet, new, new york, oahu, offer, offers, Other, Popular, project, public transit, Purchase, Real Estate, real estate brokerage, Redfin, Rent, rental, Rentals, renting, Residential, rewards, rideshare, Saving, search, searching, single, spa, time, traditional, Transportation, Travel, Travel Credit Cards, vacation, Vacations & Trip Planning, versus, walking, will, work

U.S. New Home Sales Rise by 2.3%, Despite Broader Sector Weakness

January 27, 2023 by Brett Tams

New home sales at 616,000 annual rate in December versus 602,000 in prior month, led by strong sales in the Midwest.
Posted in: Moving Guide Tagged: 2, 2021, 2022, affordability, big, Big Picture, builders, buyers, data, Deals, Economics, existing, Existing home sales, Financial Wize, FinancialWize, Forecast, government, home, home builders, home buyers, Home Sales, homeowners, homes, homes for sale, Housing, industrial, inventory, jump, Lennar, low, low mortgage rates, market, MarketWatch, Midwest, Mortgage, MORTGAGE RATE, Mortgage Rates, Moving, new, new home, new home sales, Other, present, rate, Rates, sales, shares, shortage, story, Style, The Wall Street Journal, the west, trading, Treasury, versus, wall

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

New Home Sales Look Like They Want to Bounce

January 27, 2023 by Brett Tams

The Census Bureau’s regularly scheduled monthly report on New Home Sales was released this morning.  The annual pace of 616k was right in line with the median forecast of 617k.  This is technically an improvement, but only because the previous month was revised down to 602k from 640k. In the big picture, it doesn’t much matter if today’s data is a bit better or worse than last month’s.  It’s unequivocally better than it was on several occasions in the middle of 2022 when the annual pace was closer to 550k.  If sales can avoid revisiting that territory, 550k will increasingly look like a long-term floor in the bigger picture. If sales numbers are finally bouncing, some credit could go to inventory finally doing the same.  After being squeezed down to all-time lows in early 2020, new home inventory slowly began to grow.  It didn’t eclipse 2019’s highest levels until several months into 2022.  We can credit the combination of sharply higher rates and prices for sapping demand and leaving excess inventory on the shelf for builders.  Here too, the chart looks like it wants to bounce (but against a ceiling for inventory as opposed to a floor for sales numbers). It’s a bit too soon to declare victory. Whereas 2022 was clearly a year for rising interest rates, it remains to be seen how quickly that trend will be reversed in 2023.  If inflation continues to fall and the economy softens, rates can come down faster.  This isn’t the only input for New Home Sales of course, but when the average 30yr fixed rate was well over 7%, it was certainly keeping more prospective buyers on the sidelines versus the mid-to-low 6’s seen over the past 2 months.  

Posted in: Refinance, Renting Tagged: 2, 2022, 2023, All, assets, big, Big Picture, builders, buyers, Census Bureau, Credit, data, Economy, Fall, Financial Wize, FinancialWize, fixed rate, floor, Forecast, Grow, home, home inventory, Home Sales, improvement, Inflation, interest, interest rates, inventory, low, More, new, new home, new home sales, News, rate, Rates, right, sales, time, trend, versus, wants, will

Mortgage Rates Still in Good Shape After Fed Minutes – Mortgage News Daily

January 27, 2023 by Brett Tams

Mortgage Rates Still in Good Shape After Fed Minutes  Mortgage News Daily

Posted in: Renting Tagged: 2, big, bonds, color, data, fed, Financial Wize, FinancialWize, fixed rate, Forecasts, friendly, good, Google, government, improvement, Inflation, investors, job, jobs, labor market, lenders, low, LOWER, market, More, Mortgage, mortgage market, Mortgage News, Mortgage Rates, new, News, offer, pressure, rate, Rates, survey, the fed, under, versus, will

These U.S. Cities Will Be Most Impacted by Rising Sea Levels

January 27, 2023 by Brett Tams

If sea levels rise as predicted, these cities will be in deep trouble.

Posted in: Moving Guide Tagged: 2, 2021, apartment, beach, Built, california, Cities, city, Commercial, Connecticut, construction, country, data, decades, Economy, environment, existing, Family, Financial Wize, FinancialWize, flood, flooding, Florida, growth, hawaii, home, homes, Housing, impact, list, low, LOWER, market, Massachusetts, Miami, miles, More, natural, new, New Jersey, NFL, Other, photos, projects, property, protection, rate, Rates, Research, Residential, risk, safe, single, single-family, single-family homes, society, South Carolina, states, story, time, united, VA, value, versus, Video, virginia, will, workers, Zillow

There Is No Free Mortgage

January 27, 2023 by Brett Tams

You’ve heard the term “no free lunch.” Well, the same is true of home loans. There is no “free mortgage.” Sure, banks and lenders will offer deals that make it look that way. They’ll give you a mortgage without closing costs. Or without points. But that doesn’t mean it’s free. At the end of the… Read More »There Is No Free Mortgage

The post There Is No Free Mortgage appeared first on The Truth About Mortgage.

Posted in: Mortgage Rates, Mortgage Tips, Refinance, Renting Tagged: 2, 30-year, Bank, banks, big, black, Broker, brokers, Built, closing, closing costs, commission, company, cost, Deals, escrow, expense, Fees, Financial Wize, FinancialWize, fixed rate, fund, hole, home, home loan, home loans, house, Insurance, interest, interest rate, lenders, Life, loan, Loans, LOWER, Make, making, Making Money, math, money, More, Mortgage, mortgage payments, MORTGAGE RATE, Mortgage Rates, Mortgage Tips, Mortgages, new, offer, Origination, party, payments, plan, points, principal, rate, Rates, Refinance, save, Saving, savings, Sell, simple, time, title, Title Insurance, versus, will, work, work out

2020 Loan Limits Rise Above $500,000 for Conforming Mortgages

January 27, 2023 by Brett Tams

It’s that special time of the year again when the Federal Housing Finance Agency (FHFA) adjusts the conforming loan limit for the upcoming year. As expected, the loan limit is going up again thanks to another year-over-year increase in home prices nationwide. Per the FHFA’s seasonally adjusted, expanded-data home price index (HPI), residential property values… Read More »2020 Loan Limits Rise Above $500,000 for Conforming Mortgages

The post 2020 Loan Limits Rise Above $500,000 for Conforming Mortgages appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Renting Tagged: All, buyer, buyers, Cities, city, Competition, Conforming Mortgages, Consumers, cost, country, Crisis, data, Deals, down payment, expensive, Fannie Mae, Federal Housing Finance Agency, FHA, FHA loan, fha loan limits, FHFA, Finance, Financial Wize, FinancialWize, Freddie Mac, good, hawaii, home, home buyer, home buyers, home loan, Home Price, home prices, home value, homeowners, Housing, housing finance, idaho, index, interest, interest rates, Jumbo loans, lenders, loan, Loan Limits, Loans, Local, LOWER, median home value, More, Mortgage, Mortgage News, MORTGAGE RATE, Mortgages, new, new york, new york city, News, offer, property, property values, pros, Purchase, rate, Rates, Refinance, Residential, san francisco, time, versus, will
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