The other day on Youtube, I typed ‘Invest £100 a month’. I was trying to find examples or testimonials of people who invested this much a month because, as I have said before, becoming a millionaire £100 at a time would take more than a lifetime.
Well, Youtube didn’t disappoint; I wasn’t prepared for this though! XD
Obviously, if I am breaching copyright I am happy to take this down. However, this video is too good not to share!!! No copyright infringement is intended and all credit of this video goes to Dave Ramsey.
Investing £100 a month, my own – uneducated – calculations
Dave Ramsey here is assuming 12% interest.
I do not pretend to know much about the stock market just now, so I prefer to project using 7% interest. The results I get are very decent and manage to hit my own minimal Financial Independence for retirement. But as the title of the blog suggests, I would be a lot happier with a million pounds.
Investing 15% of income, my calculations
I have just had a small raise of £54 from this month and was wondering how to calculate this amount. I had two options.
Option 1: the first was to just calculate 15% of the new salary.
Option 2: the second was to calculate 15% of the old salary, then add £54 on top of that. That would mean that any raise would get added directly into the investment without tempting me in lifestyle inflation.
In the end, I decided that option 2 would be more in keeping with advice from the FIRE community. Therefore, I entered that particular amount in the calculator, again with 7% interest and 2% inflation.
Again, as you can see, with 7% interest I would probably still not hit a million in 40 years. However, I would end up with a very tidy sum of £742,797,94.
My take away point from crunching the numbers
After playing around with the calculator with some time, I came up with these final, realistic(ish) number.
To retire at the age of 65 with one million pounds, I would have to invest £475 a month (7%, 2% inflation) until then. I better start saving/investing then!
This month I managed to invest £236.74, nearly 50% of that target amount.
So I have some way to go to reach this goal. However, I have hit a milestone this month: I have finally saved up the equivalent of 6 months of salary in my emergency fund!
To conclude: I would love to be more optimistic about the market and have the knowledge that I would need to be able to make similar statements to Dave Ramsey.
One point he did put across powerfully is consistency and discipline are key in this process and that sacrifices can be made to get there.
Now my last question is: after a raise, does my emergency fund need to be topped up to 6 times the new salary?