Albert Einstein, the greatest scientific mind of the 20th century said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
In other words, compound interest is free money. For example, if you are an E-1 and save 5 percent of your base pay each month, $74 ($37 every two weeks), your savings will grow to $40,000 at the end of 20 years. The most amazing part is you will only have saved $20,000 during that time, but through the magic of compound interest it will have doubled in value. This is $20,000 in free money.
Even better, the current example assumes you are an E-1 your entire service (highly unlikely). Therefore, the potential exists for all military members to retire with at least six figures ($100,000 or more) without much sacrifice.
Now this approach sounds easy, but only if you plan ahead and make it easy on yourself. First, you have to actually save. In other words, setup an automatic withdrawal from your accounts into a savings fund or into a program like the Thrift Savings Program. Pay yourself first, and then pay your other bills.
The TSP is great because we have easy access to it from work, and it even lowers your tax rate. For every dollar you save, you pay less in taxes, allowing you to save even more. Free money once again.
Second, you have to be patient. Your money saved will move painfully slow over the first few years, but before you know it, you’ll have a good amount put away.
Third, you have to be consistent. If you get discouraged or decide not to save each month, you’ll only slow the process. It is better to consistently invest small amounts than to try and catch-up with larger amounts later. The key to compound interest is time.
With all this talk of E-1 pay and 20 years time, many of us are well beyond this age and may or may not have saved enough for ourselves. However, the same magic of compound interest applies — it’s never too late to start. Even five years of dedicated savings with a modest return (say 6 percent) can produce healthy sums. Free money abounds.
These examples are only a few simple thoughts on saving and investing. The Department of Defense has set up a great website called www.militarysaves.org. This site contains information on getting savings started and includes hundreds of links to financial institutions and calculators for you to plan your future. I encourage you to go to the website and find your free money.
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Albert Einstein, the greatest scientific mind of the 20th century said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
In other words, compound interest is free money. For example, if you are an E-1 and save 5 percent of your base pay each month, $74 ($37 every two weeks), your savings will grow to $40,000 at the end of 20 years. The most amazing part is you will only have saved $20,000 during that time, but through the magic of compound interest it will have doubled in value. This is $20,000 in free money.
Even better, the current example assumes you are an E-1 your entire service (highly unlikely). Therefore, the potential exists for all military members to retire with at least six figures ($100,000 or more) without much sacrifice.
Now this approach sounds easy, but only if you plan ahead and make it easy on yourself. First, you have to actually save. In other words, setup an automatic withdrawal from your accounts into a savings fund or into a program like the Thrift Savings Program. Pay yourself first, and then pay your other bills.
The TSP is great because we have easy access to it from work, and it even lowers your tax rate. For every dollar you save, you pay less in taxes, allowing you to save even more. Free money once again.
Second, you have to be patient. Your money saved will move painfully slow over the first few years, but before you know it, you’ll have a good amount put away.
Third, you have to be consistent. If you get discouraged or decide not to save each month, you’ll only slow the process. It is better to consistently invest small amounts than to try and catch-up with larger amounts later. The key to compound interest is time.
With all this talk of E-1 pay and 20 years time, many of us are well beyond this age and may or may not have saved enough for ourselves. However, the same magic of compound interest applies — it’s never too late to start. Even five years of dedicated savings with a modest return (say 6 percent) can produce healthy sums. Free money abounds.
These examples are only a few simple thoughts on saving and investing. The Department of Defense has set up a great website called www.militarysaves.org. This site contains information on getting savings started and includes hundreds of links to financial institutions and calculators for you to plan your future. I encourage you to go to the website and find your free money.