Time is Money: Part 2
I recently wrote about the effect of compounding and the impact it can have in the long-term. You can find it here
Today I want to take it one step further and look at the impact of increasing those monthly contributions every year.
Let’s assume the following:
You start investing at 30 for 35 years
You invest $100 per month to start
Every year, you increase your contribution by $25 per month
You achieve a 6% rate of return
In our previous scenario, we didn’t increase our contributions and at age 65, we had $142,471,03. In that case you would have invested $42,000 yourself and had growth of $100,471.03
In our new scenario, you would end up with a portfolio valued at $544,951.92. Your contributions would total $220,500 and your growth would be $324,451.92.
The difference is huge.