I recently wrote a post about how you might be able to stop investing and still hit your net worth goals. The gist of it is that if you are an aggressive saver, you might have enough money right now, and it can grow on its own to hit your goals. For example, if you’re a 21-year old kid and saved $50,000 now, it’ll be worth about $1,000,000 by the time you are 65. This was recently picked up by the ChooseFI Facebook group. Unfortunately I can’t participate in the group because then I’ll reveal my identity, so here is a bit more explanation of the post, which I hope will spur further discussion.
In my previous post, I talked about something I call the “Stop Investing” number. Your Stop Investing number is the amount of money you need right now to hit a target net worth in the future, without investing anymore money. You may realize that you’ve already hit this, and it’s smooth sailing! But what if you’re just getting started, and you want to know how much money to invest each month to hit a target net worth? The math behind this is significantly more complex, but I’ve got you covered!
Did you know that you might be losing out on $100,000 for every single year that you delay investing? So it’s time to start now, right? Right. The earlier you start investing, the easier it will be to retire. But at what point have you invested enough? When can you be confident that your investment portfolio will provide for your retirement? This is called your “stop investing” number — when your portfolio is big enough to achieve your goals without contributing another cent. And you’ll reach it much earlier than you think.
Why do you invest in the stock market, bonds, dividend paying stocks and real estate? Well, that’s how you build up a nest egg that lets you retire! But why are those good investments? What is it about stocks, bonds and real estate that make them so attractive? The answer is that these assets increase (or decrease) in value by a percentage every year. This means they undergo exponential growth, which will put you on the path to millions.
A lot of people are scared about investing their hard earned money. They don’t necessarily understand the stock market and they’re afraid of losing all their money. They might think they don’t have enough money to invest anyway. I’ve talked to a bunch of younger Millennials and they aren’t investing because “I can save for retirement later.” The thing that people don’t realize is delaying investing, even for a single year, will cost you at least tens of thousands of dollars, and probably hundreds of thousands.