When I post stuff like this, it’s not about shaming spending money on things that you like. I believe the goal of money is to maximize your lifetime happiness and to help people. And I think it’s easy to fall into the trap of spending too much today in an attempt to chase fleeting happiness. That temporary endorphin boost you get from a newly leased car or a fancy dinner out wears off quickly.
If you spend every dollar to your name you’re very likely to be less happy. That leads to more stress about losing your job, taxes, debt, work, interest rates, saving for retirement, etc. But if you’re plowing money into investing and living (slightly) more simply those fears melt away. You’ll be happier today opening a bottle of two-buck-chuck at a park with a friend than a fancy night out because you’re free. And you’ll be happier later when you retire early or wealthy or both and can live and give generously.
For me, Column B is where happiness is more likely to be found.
And as far as the math, the $5.5M comes from a $1,000/month investment at a 10% rate of return. If you’re wondering where to get 10%, the S&P 500 has averaged about 11.5% per year over the last 40 years and about 10% over the last 100 years.
This doesn’t account for inflation of course. $5.5M in 40 years won’t be what it is today. (It will likely be worth about half of that). But also, this assumes that $1,000 contribution stays flat. Most people’s income and investing goes up faster than inflation over time. So the $5.5M isn’t out of the question if you ramp up those investments as your career advances!
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.