For many people starting from scratch, a million-dollar retirement nest egg seems wildly out of reach. It takes money to make money, after all, and it seemingly requires more cash than the average paycheck provides once all the bills are paid. Discouraged before they even try to get started, many would-be investors don’t even bother trying to become self-made millionaires.
That way of thinking, however, overlooks a critical element of building a fortune from nothing. That’s that time can do a lot of work even when there’s not a lot of extra cash to invest for the future. In fact, you might be shocked at how much money you can make over the course of 40 years just by scraping up an extra $100 per week.
A little goes a long way, given enough time
With the Census Bureau reporting the average U.S. employee makes around $41,000 per year while the average household annually banks something on the order of $67,000, it comes as no surprise that the majority of Americans say they’re living paycheck to paycheck. Money often gets tight before the next paycheck arrives. Having any extra funds to take away feels practically impossible.
But you might be surprised at the amount of cash you can free up when you’re serious about saving. Canceling cable, switching insurance providers, closing a gym membership you never use, and cooking at home rather than eating at restaurants are just some of the tough cost-cutting decisions you can make that usually don’t seem so tough once they’re made. Freeing up an extra $100 a week isn’t impossible to most of those who make a real effort to do so.
But is an extra $100 per week enough to truly matter? Actually, it’s quite a bit, as long as you remain in the habit of putting that extra money to work for you in the stock market…even when it’s tempting to stop.
Let’s take a hypothetical investor named Annie as an example. At 25 years old, Annie has just landed her dream job as a chef, with a starting salary of $30,000 per year. She knows she may never make considerably more than that, but she doesn’t care — she loves her job! She also loves the idea of eventually retiring, though, and because the restaurant she works at doesn’t offer pension or retirement benefits, she knows she’s going to have to make that happen on her own. Living modestly, she’s able to set aside an extra $100 per week, putting that money into an S&P 500 (SNPINDEX:^GSPC) index fund that conservatively returns an average of 9% per year.
How much will Annie have at the …….