How investing $500 a week could make you $1 million a year

Investing is the key to not being forced to work forever.

But if you’re like most people, the fear of making a mistake is holding you back from reaching your true investing potential.

But this is a fear that’s valuable to overcome.

Building your first $100,000 through investing is hard work. Based on the long-term return of the Australian share market of 8.8 per cent, by saving and investing at a rate of $500 per week, it would take you around three-and-a-half years to build up $100k.

But once you’re at this point, it only takes you 2.5 years to build the next $100,000. From there, the next $100,000 would come in less than two years, then 1.5 years for the next, and it keeps going.

By the time you reach year 15, contributing at the same rate will mean your investments are growing by over $100k every single year. By year 23, your investments will be growing by over $200,000 annually. And by year 34, your investments will be pumping along, growing by a staggering $500k every single year.

From there it just gets better, and by year 42 your investments would be growing by over $1 million every year.

This is with the exact same amount of savings and new investment going in each year. What changes is the amount of growth your investments are delivering for you. In the early stages of your wealth building, you’re the one doing the heavy lifting, and how much you invest is the biggest driver of the results you achieve.

But then you reach a tipping point, where your investments take over and start doing the work for you.

The power of time

You can see from this example that the power of time and money is huge. You’ll also notice that the biggest investment return you receive as an investor is always in the last year you hold your investment. The implication here is that getting started even one year sooner is going to have a serious impact.

When you’re investing, particularly in the early days the important thing here is that you get started. Thankfully technology is making it easier today than ever before to invest, with some micro investing accounts allowing you to get started with as little as one cent.

Obviously the more you invest, the faster your investments will grow. But particularly if you’re new to investing, or just super nervous when it comes to your money, starting small is totally OK – and a thousand times better than doing nothing.

Even if things are tight right now and you don’t have much money leftover after your bills and living expenses, you should be able to find at least a tiny amount of money to direct to building your wealth.

The first step is always the hardest, but once taken you immediately start building momentum that makes your next steps easier.

Consistency is critical

Small investments done regularly will create serious results over time – but you have to be consistent. Many investment accounts today have a feature where you can set up a regular recurring investment from any bank account, having money taken out of your account and invested weekly or even daily.

The right frequency depends on your situation and how much you’re investing, but personally I like a weekly cadence. That being said, in the past I’ve done daily investing having money debited out of my pocket money account, and I found that I hardly even noticed the money coming out of my account.

When you’re investing with this level of regularity, you’ll see your investments constantly growing, you’ll be more likely to look at how you’re progressing. As a result, you’ll build your knowledge and understanding of investments faster.

When to start investing

My challenge to you is to get started today.

Investing is a skill, a behaviour, a habit and a muscle that you build over time. The sooner you get started, the sooner you start flexing the muscle and building your knowledge and confidence around investing.

I guarantee you that once you get started, even if it’s only with a tiny amount, you’ll start building an interest around investing that will get you motivated to do more. Before you know it you’ll be upping your investments, and making more progress getting ahead.

And BOOM, you’re an investor. Don’t worry too much about trying to be an investment expert at the start, because as soon as you start investing you’ll start learning.

You’ll see what’s going on in markets. You’ll start lining up what’s going on in the headlines to what’s going on with your investments. And you’ll start building your investing confidence, all while you’re setting up your future.

How Can We Help You?

It’s important to make smart decisions when it comes to things that will affect your future. When you make the right investments for retirement, you can ensure financial security for yourself.

If you’re seeking a financial advisor for retirement planning and want to be smart about your super and investment savings, reach out to Blue Financial. Blue Financial Ballarat is one of the oldest and one of the most trusted planning firms in Ballarat. We help individuals manage their wealth, grow their super and achieve their dream retirement lifestyle.

Let us help you reach your financial goals today!

General Advice Warning: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning Pty Ltd (131 267), and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Please contact us if you want more information.

Emmerson Family Trust (ACN 115 518 208), trading as Blue Financial, is an Authorised Representative and Credit Representative of AMP Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee

———————————————————————————————Original article: Ben Nash (2022). How investing $500 a week could make you $1 million a year.


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