|
How much is “a lot of money” to you? 500,000 ? 1 million ? 5 million ? The more the merrier ?
Matthew 6:26 : |
Money is an idea, wealth is a habit. To further illustrate, let’s see some case studies.
Prepare For Retirement
Case Study 1:
If we have $1,000,000 in assets, but don’t know how to wisely invest and just put in savings account that gives us 3% annual interest (i.e. 3% ROI), while maintaining high monthly expenses at $10,000, the money will be spent around 8 years.
Capital Amount: $1,000,000
Annual Expenses after Retire (current value): $120,000
Estimated ROI: 3%
Inflation Rate: 5%
|
Year
|
Opening Balance
|
Annual Expenses after Retire
(5% inflation rate,future value) |
After Deduct annual expenses,
3% ROI on Opening Balance |
Year End Balance
|
|
1
|
1,000,000
|
120,000
|
26,400
|
906,400
|
|
2
|
906,400
|
126,000
|
23,412
|
803,812
|
|
3
|
803,812
|
132,300
|
20,145
|
691,657
|
|
4
|
691,657
|
138,915
|
16,582
|
569,325
|
|
5
|
569,325
|
145,861
|
12,704
|
436,168
|
|
6
|
436,168
|
153,154
|
8,490
|
291,504
|
|
7
|
291,504
|
160,811
|
3,921
|
134,614
|
|
8
|
134,614
|
168,852
|
-1,027
|
-35,265
|
Prepare For Retirement
Case Study 2:
If we have only $500,000 in assets, but know how to wisely invest into financial products that gives us 10% annual ROI, while maintaining only $2,000 in monthly expenses, even the initial value is low, we will be financial free forever.
Capital Amount: $500,000
Annual Expenses after Retire (current value): $24,000
Estimated ROI: 10%
Inflation Rate: 5%
|
Year
|
Opening Balance
|
Annual Expenses after Retire
(5% inflation rate,future value) |
After Deduct annual expenses,
10% ROI on Opening Balance |
Year End Balance
|
|
1
|
500,000
|
24,000
|
47,600
|
523,600
|
|
2
|
523,600
|
25,200
|
49,840
|
548,240
|
|
3
|
548,240
|
26,460
|
52,178
|
573,958
|
|
4
|
572,958
|
27,783
|
54,618
|
600,793
|
|
5
|
600,793
|
29,172
|
57,162
|
628,782
|
|
6
|
628,782
|
30,631
|
59,815
|
657,967
|
|
7
|
657,967
|
32,162
|
62,580
|
688,385
|
|
8
|
688,385
|
33,770
|
65,461
|
720,076
|
From above illustration, you may not have the ability to earn high income, but you definitely have the ability to manage your expenses and your investment returns.
If you want to retire young retire rich, becoming a millionaire doesn’t have to be an option.
Prepare for retirement with any one of the sectors as mentioned before: business, real estate, paper assets (as illustrated above) or virtual properties.
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