Saturday, November 13, 2010

Save More or Earn More

I would like to highlight an interesting mathematical relationship on why you should considered taking calculated risk in order to achieve your financial objective. In this case, the targeted financial goal to achieve $500,000 by age 62.

Don't forget the power of time! 37 years of accumulation which can be considered long enough to have achieved the expected rate of return of 7.68%. The expected annual saving would be just $5,596!!! ( i.e. only $466 monthly investing).

As compared with a return of 3.68%, you are required to save more!
How much more? $5139 (91%) more on an annual basis.

If these options are not attainable, work towards doing a little bit of both;
saving more money and earning a higher rate of return.

Having a good understanding on these relationship, you probably willing to take the calculated risk, so that you can make better use of that saving on other areas of financial concern.