Today my family and I were in Santa Barbara, California and we made a trip to visit the Botanic Garden. This was my first trip to the garden and I was blown away!I live in Phoenix, AZ and our botanical garden features desert plants that usually lack any real color. In Phoenix, everything looks like it’s dead – or about to be. It’s difficult for much to stay alive in such a dry desert climate. Our visit to the Botanic Garden in Santa Barbara was a pleasant experience. The garden featured lush plants, running water, and large Redwood trees. As we were walking along, we came across one of the iconic Redwood trees and I couldn’t help but stare at the seemingly never ending height of it.
If you are unfamiliar with Redwood trees, they are the largest trees in the world and can live thousands of years. They can grow to over 300 feet tall, (taller than a 25 story building) and the largest trees take 20 people hand in hand to span around the base of the tree. In other words, these trees are massive!
The picture at the beginning of this article is a picture of my daughter and I standing at the base of a young redwood. As I walked through the garden, I came across one of the cones, or seeds, of these massive trees.
As I looked at this seed, the finance dork in me immediately though of retirement. I quickly looked at my wife and showed her the seed. “This would be perfect for my blog!” I exclaimed. She looked at me with a half annoyed face and walked away. I couldn’t help myself. It was so inspiring to me to see such a small see that was responsible for the largest trees on this earth.
This is exactly how our retirement investments work. The hardest part is starting. Planting our small seeds and watching them grow into massive trees is the wonderful miracle of compound interest!
How miraculous is it? For instance, say you put $100 a month away into a savings account for 30 years. At the end of that 30 years, you would have saved a paltry $36,000 if you left it in a savings account. If you invested that money and received a modest 8% interest on it, your $36,000 investment would have grown to $146,815.04 after 30 years! Those numbers are based off of only $100 a month…
Say you started saving at 20 years old and invested that $100 a month for 40 years and retired at the age of 60. Your $100 a month in a savings account would be worth $48,000. Had you invested it, it could easily have grown to $335,737.25!
I hope you understand the power of compound interest and I also hope you are saving more than $100 a month. Imagine if you were able to invest $300 a month for 30 years. Your investment could be worth $440,445.12!
As you can tell from the above numbers, you don’t have to save massive amounts of money to gain a sizable nest egg. Your biggest ally is time. If you are starting late in your journey and time is not on your side, you will need to invest as much as you possibly can to make up for your lack of time. In addition to these numbers, they do not include reinvested dividends so chances are your nest egg would be even larger 🙂
Get Rid Of That Debt
So, if $300 a month can get you to nearly half a million in retirement, imagine what double or triple that would be? This is where the elimination of debt comes into play. How much is your monthly car payment? Hopefully you can say “zero”, but if not, imagine paying yourself a considerably large retirement rather than paying interest to the banking industry.
I love running numbers, so to appease my curiosity I put in a few compound interest scenarios.
$500 a month for 30 years, 8% interest= $734,075.21
$1,000 a month for 30 years, 8% interest = $1,468,150.42!
$1,000 a month may seem like a lot but if you set yourself up and contribute to a pretax account, you may hardly notice the investment coming from your take home pay. $12,000 a year is very doable for most people, its just a matter of making it a priority.
If you need a reminder on how to destroy that debt, refer to my related article: Arrest Your Debt – The Debt Payoff Playbook
It’s Your Turn To Start Winning!
When you start to feel upset with your current financial situation, remember that even the mighty Redwood started out as just a tiny seed. The hardest part is planting that seed and remembering to water it on a regular basis. You can do it my friends, it’s time to change your life and win in retirement. I’m proud of you already for reading this article to the end. Stick with it and let me know if there is anything I can do to help you succeed! Keep it up, you work too hard to be this broke!
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If you’re ever in the area, I highly recommend the Santa Barbara Botanic Garden. For more information, visit them here: Santa Barbara Garden