The simple math of saving

There’s a lot of BS/financial porn you can read or find on TV. After all, it can be really, really exciting to look at the potential of finding the next Google or Amazon before it’s big instead of saving. Unfortunately, your odds of actually finding something like that are pretty damn small.

Let’s talk about what you can control and how it can make a difference: how much you save. It’s not as sexy but it’s the key to successfully going full time streaming as well as having the kind of money to let you choose what you do with your life.

Assumptions

Ok, first we’re going to use a couple of assumptions. In this scenario you’re 25, single, and just starting to save money. You’ve built up your emergency fund so now it’s time to start investing. You stop saving at the “traditional” retirement age of 65.

Other than that, we’re going to use 3% inflation and a 7% annual growth rate. Neither of those is guaranteed but it helps make the math clearer. Similarly, we’re assuming that the maximum contribution you can make to an IRA won’t change, which it almost certainly will.

The Math

$1/day

What does it look like if you save just a dollar a day? If we use the assumptions you’d have $80,500 at age 65.

Not bad, huh? It’s not enough to carry you through retirement, of course, but it’s pretty cool. One dollar per day ends up as tens of thousands of dollars.

$100/month

Let’s get more ambitious. What if you about triple what you’re saving and put away $100/month? You’d end up with $282,000!

Now we’re starting to see the power of saving early.

Maximizing IRA

Our final demo shows you putting the max into an IRA for the next 40 years. If you religiously sock away that $458/month or $5,500 per year you’d end up with $1.292 million. With an M million.

Now that’s some better looking math, isn’t it? That’s starting to be enough to live off of.

Starting 10 years later

So now let’s look at the cost of delaying. To you from repetitive math, I’ll just run the $1/day scenario. If you started at age 35 and saved for the next 30 years you’d end up with $40k, or basically half of the 40 years of savings.

Weird, right? You saved for 3/4^ths of the time but only got ½ the value. Check out those graphs again though. You’ll see that most of the growth comes in those last 10 years. After all, 7% of $50,000 is a lot more than 7% of $1,000.

What it all means

Save early! Even if it’s not the most fun thing to do it makes a lot of sense. The cool thing is that even a small amount can make a big difference. Of course, you can always put away more as you’re able but starting and getting in the habit will help that in the long run. You should not put off starting your savings just because you can’t save as much as you think you should right off the bat.

You’d have to save $2.32/day to end up with that 40 year total over 30 years. While that’s still not a ton of money it’s big when you look at the other scenarios. After all, 2.32 * $5,500 is $12,760. That’s a lot more to save per year if you start just ten years later. Do those graphs perfectly represent how your savings will go over time? Nope. There will be ups and downs if you’re investing. It’s just meant to illustrate the potential.

You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.