Quote:
Originally Posted by Unregistered
The point is that you only need to do that for a few years.
Let's say there are 2 people.
Both earn 300k takehome.
A spends all of it.
B spends only 36k and invest 264k a year (let's just say 22k monthly in bonds of 4% interest per year).
After 5 years at the job, A has no savings. B has $1.43M.
Now, recession hits. Both lose job.
A has no choice. He has to go find a job even if it pays less than 300k because he has expenses to pay.
B can literally just live off the interest of 4% per year which is 57k a year or 4.7K a month if he wants to while taking his own sweet time to find a job that pays him 300k or more. He will in fact even has excess because his expenses is same as when he earning 3k a month.
Now, I used bonds as example. Imagine stock market.
Compounding interest is the key. Literally earning interest on interest.
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Your example is far too simplistic because nobody earning 300k is going to spend all of it. Btw which bonds which aren't complete junk are going to pay 4% in the current market?