Borrowers and Savers: Get Great Interest Rates

It amazes me how the internet enables new business models where individuals have access to a much larger interested population. eBay is the best known example of this concept. I can buy or sell an item in either a yard sale (low population access), in the classifieds (medium population access) or in eBay (maximum population access).

Prosper.com has now created an on-line market place for borrowers to get lower interest rates and savers to get higher interest rates. Prosper gives maximum population access for the activity of people-to-people lending.

The process is simple. People who need money request a loan. People who lend money make bids to loan them money. Prosper puts in place the mechanisms to enable the process and minimize defaults. For this, Prosper earns a small fee, about 1.5%, for their service.

To minimize defaults, Prosper uses “groups” to verify borrowers are real people and to aggregate people of similar risk. Groups have will get lower or higher interest rates based on their reputation and borrowing history. Groups also provide social pressure since member’s repayment (or non-repayment) of loans will affect future interest rates for group members.

Interest rates range from 7% to 23%. This is often lower than alternative debt (e.g. credit cards) borrowers can get and higher than interest rates (e.g. CDs) savers can get. Bid amounts for loans are typically $50 - $100, with some bids as high $1000.

To be clear, there are risks for lenders. These are unsecured loans. If a borrower defaults, then the lender will lose the balance of the unpaid loan. The risk can be reduced for the lender by loaning many small amounts to different borrowers. This risk reduction strategy can work well if the relative default rate is low at an interest rate level, which is why Prosper appears to be attractive to individual small lenders.

Based on what I’ve read from their website, I am considering signing up with Prosper to bid on some loans. The possibility of 7-23% returns on a small part of my savings is very interesting.

Disclosure: I have no financial relationship with Prosper.com at this time. In the future, I may register to participate as a lender in the bidding process.

This is not financial, investment or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Carnivals of Real Estate, Money & Finance

For those of you new to the concept, Carnivals are a collection of posts from bloggers on a certain topic. The submissions are vetted by the Carnival host and then linked to in a single post. I read Carnivals regularly to find new ideas I can use.

This week My Wealth Builder posts were published in five Carnivals. The Carnivals, hosts and links to the posts are shown below.

The Carnival of Personal Finance hosted by Canadian Capitalist: How Much is Needed to Be Wealthy - THE NUMBER: My Wealth Builder runs some calculations to find out how much he needs to retire.

The Carnival of Debt Reduction hosted by Blogging Away Debt: Super Saver presents Debt Ratio Implications posted at My Wealth Builder. Super Saver has calculated their Debt Ratio. Have you?

The Festival of Frugality hosted by My Money Forest published Are You Frugal or Stingy?

The Carnival of Real Estate hosted by Matrix: Avoiding an Expensive Mortgage Mistake [My Wealth Builder]. Super saver tells us that if we can’t afford a house with a fixed rate mortgage, then we better buy a smaller one.

Wealth Building Ideas hosted by Wealth Building World: Super Saver presents Building Wealth On Just $1 Per Day posted at My Wealth Builder.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Time to Plan for 2006 IRA Contributions

While the deadline is April 16, 2007, it’s not too soon to start setting aside money for your 2006 IRA contributions. As I wrote in a previous post, IRAs are one way to use “other people’s money” to save.

For 2006, the maximum IRA contribution is $4000 per person with a $1000 catch-up contribution for people 50 or older.

Regular IRA contributions are 100% deductible for incomes up to $50,000 (single) and $75,000 (married filing jointly). People with incomes over $60,000(single) and $85,000 (married filing jointly) cannot deduct regular IRA contributions. Roth IRA contributions are not deductible and the maximum contribution can be made for incomes up to $95,000 (single) and $150,000 (married filing jointly). People with incomes over $110,000 (single) and $160,000 (married filing jointly) cannot make Roth IRA contributions.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Using Other People's Money to Save

In real estate and business, using “other people’s money” (OPM) is a considered a smart way to acquire property or fund your business. The concept of using OPM can also be applied to saving. Here are some OPM strategies that I like to apply to saving:

Your Employer’s Money
Many employers match 401K contributions up to 2%. That’s 2% free money. Always contribute at least the amount your employer is willing to match.

The Government’s Money
Even if your employer doesn’t match your 401K contribution, the government doesn’t tax any money that is contributed. This results in the government covering 15-30% of your 401K contribution, depending on your tax bracket. And you don’t pay taxes on your earnings until you withdraw.

If you qualify for and contribute to a deductible IRA, the government is paying 10-25% of your of your contribution.

For non-deductible and Roth IRAs, earnings are tax free. The benefit of 10-25% additional savings being compounded 10-30 years can be big. In addition, qualified withdrawals from a Roth IRA are tax free.

Gifts or Inheritances
Gifts and inheritances are 100% OPM and is an unexpected windfall. If it is put into savings, it will be a gift (or inheritance) that keeps on giving.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Carnival of Personal Finance #66

This week’s Carnival of Personal Finance is up and running at Free Money Finance. For those of you new to the idea, Carnivals are aggregations of post submissions from bloggers on a certain topic, in this case Personal Finance. These submissions are vetted by the Carnival host and the selected posts are included in the Carnival posting.

I like the format used by Free Money Finance. He lists each submission with a short summary of the post topic. His format enables you to quickly pick those posts in which you have interest.

This was my first experience with a Carnival. One benefit of reading a Carnival post is that there are a number of excellent ideas, strategies, systems, and methodologies all in one post from various bloggers. In a short time, I found several ideas that I will consider further for including in my own wealth building strategies.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Renegotiating an Unfavorable Mortgage

I know of someone whose bank offered to renegotiate their ARM mortgage when interest rates were falling. I wonder if there are people who have been successful at renegotiating an Option ARM or ARM loan with their bank when interest rates have been rising. If you have, please send me an e-mail.

If I had a risk of defaulting on a loan, I was thinking the first organization I would consult is the holder of the loan in advance of the possible default. I would tell them that a loan default is a possibility and ask them if there is any way to renegotiate the mortgage to terms that would help me AND the bank. The worst they can say is “no” and I am no worse off than before. And there is a small possibility they may renegotiate to a more favorable fixed rate 15 or 30 year loan.

I believe this approach works best if the holder of the loan is a local bank. Unfortunately, most loans are sold off to larger banks or Fannie Mae. However, it’s still worth asking for a renegotiated mortgage, especially if selling the house may not cover mortgage. In most cases, the bank or Fannie Mae doesn’t want to own the house and would rather have someone paying on a loan.

Disclaimer: I am not a professional in the area of personal finance. Please consult a professional financial advisor before acting on any of the ideas shared. Each person’s situation is unique and the above ideas may not apply.

This is not financial or mortgage advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Avoiding an Expensive Mortgage Mistake

If you are considering a refinancing or taking out a mortgage to buy a house, understand the terms, pros and cons of your specific mortgage type. Not doing so can be an expensive mistake.

I am the conservative type when it comes to debt. I have owned two houses. Both of them were purchased with fixed rate mortgages. For my first house, I put down 20% for a 12%, 30 year mortgage which had yearly payment increase to payoff in 15 years. For our second house, we put down 40% on a 5.375%, 30 year mortgage.

I have never seriously considered an adjustable rate mortgage (ARM) or an Option ARM. I didn’t want to have the risk of interest rates increasing. Twenty years ago, using an ARM mortgage proved to be the right choice. A colleague of mine purchased a house in the 1980’s with an ARM and has had an equal or lower interest rate with each adjustment.

Recently, ARMs and Option ARMs have proven to be a bad choice, and in some cases, a punishing choice. As Business Week points out, many homeowners will receive a very unpleasant adjustment to their mortgage this year, one they cannot afford and, therefore, may lose their homes. Some of these same people created their own nightmare by trading a conservative fixed rate loan for the risky ARMs. They did not understand the risks.

Bottom line, if you can’t afford a house with a standard fixed rate mortgage, then it is likely you can’t afford the house at this time. Rather than take on a risky mortgage, work on saving more to put down a larger down payment or buy a smaller house.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Frugal or Stingy?

Our goal is to be frugal. An excellent article in msn.com provides great perspective on this question.

In the article, Mary Hunt provides a great definition of frugal and stingy. "Frugality is the activity required for me to live below my means," said Hunt, whose latest book is Live Your Life for Half the Price. "Stinginess is the activity of requiring others to participate in my frugality."

Here are some examples from the article that bring the difference to life:

If you use 2-for-1 coupons at a restaurant, you might be frugal. If you base your server's tip on the discounted bill, you're probably stingy.

If you decide in advance how much to spend each year on charitable contributions, and then try to stay within that budget, you might be frugal. If the last thing you gave to charity was an ancient can of lima beans you wouldn't eat yourself, then you're probably stingy.

If you use a tea bag for more than one cup of tea, you might be frugal. If you offer a guest the cup made from the used bag, you're probably stingy.

We pass the frugal test on the examples above. However, I think I can always do better to be more clearly frugal :-)

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

To Budget or Not to Budget ...

We use budget-free money management.

I define budgeting as a formal detailed process for planning and tracking available money and spending activities. I’ve managed my money both ways, with and without a budget. Without a budget is much better. However, it requires more upfront discipline.

I find detailed budgeting frustrating because I have to track and categorize every expense. Thus, every expense is scrutinized for evaluation and adjustment. I don’t want to do that. (By the way, I am a very detailed person and very good at math.)

The approach I like is to save a percentage of my salary, then create a separate savings fund for future large expenses (e.g. new roof on house, vacation, car, college or furniture) and, finally, spend the rest. It’s somewhat like having three jars in which to divide our money. If there is money left over in the spending account, we carry it over to the next month. Of course, if we run out of money, we can’t spend anymore.

The main benefit is that we don’t need to worry about how much we spend on each element, e.g. eating out, entertainment, food or gas. We just need to manage the total amount spent and the elements are self managing. The hard part which requires the upfront discipline is that we take out about 30% of our before tax income (20% for savings, and 10% for future large purchases), before we ever start spending.

This is not financial or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Teachers Know - Start Saving Young

The power of starting your savings young cannot be overemphasized. There are many calculations showing the benefits of using time to grow your savings. You can become a millionaire even if you earn a normal income. Here’s a real life example of a teacher who started saving at 22 and was a millionaire when she retired.

This is not financial, or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Alcohol and Income

I always knew that my daily glass of red wine was good for me, but I didn’t know how much :-) I was listening to NPR on the way home from work and heard a story that drinkers earn 10-14% more than non-drinkers. Here’s a link to the article on CNNMoney.com.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Time to Lock in CD Rates

It’s time to lock in higher CD rates. The rates have peaked in the last couple months. We have 80% our IRAs in CDs at this time. I have some laddered CDs that just matured and will reinvest them. I will not be investing any new money in CDs.

As I wrote in a previous post, I have been investing in CDs since last year. The best rates I locked in so far are a 3 year 5.55% CD and a 5 year 6.0% callable CD. Since I bought these CDs in July, 2006, CD rates have declined. Today, I purchased a 3 month CD at 5.2%, a 6 month CD at 5.25% and a 2 year CD at 5.2%. These were the rates at Charles Schwab. I just checked the TD Ameritrade website and rates were 5.0% to 5.1% for the same periods.

Bank Deals has posted the best rates he has found for week ending September 9, 2006. His recommendations give a good benchmark to which to compare your local offerings. Or you can buy direct from one of his recommendations.

To keep management of our CDs simple, we buy all CDs through our discount brokerage accounts, Charles Schwab and TD Ameritrade. We can buy over the phone and do not have to worry tracking multiple CDs with different financial institutions.

This is not financial, investment or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

How Much to Save - THE NUMBER

How much should one save from every paycheck? If one’s goal is to retire comfortably, the minimum number is 12% of one’s before-tax salary. This is based on an article by Charles J. Farrell, J.D., LL.M. He recommends that people save 12% of their salary (or income) from 30 to 65, the age of retirement.

His rationale is that saving 12% of one’s salary will result in a next egg of 12 times one’s salary at 65. At a real growth rate 5% and a 5% withdrawal rate, this next egg will provide 60% of one’s final salary for many years. With Social Security providing another 20%, the retiree will have an income of 80% of his final salary.

80% will be equivalent to their actual pre-retirement available income since they previously had been reducing income by 18% (saving 12% and paying 6.2% in Social Security tax).

Personally, I am saving at a 20% rate for a couple reasons.

First, I’d like to retire earlier than 65. Since I will have more retirement years, I think will need about 16 to 18 times my salary saved when I retire. I will know for sure in the next month since I have requested an estimate from my financial advisor.

Second, I don’t believe that Social Security income benefits will be available to me at 65. Therefore, I plan to provide 100% of my retirement income needs. I’ll consider it a bonus if Social Security income benefits are available.

This is not financial or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Getting Motivated To Save

Saving is tough to do. Getting rewarded is energizing. Here are the top five rewards that keep me motivated:

1. Always having the money for what I need. Vacation, gifts, new toys, or emergencies …, I never have to worry about whether I have the money. It’s just a matter of determining if I really need it.
   
2. Only paying once for something. I like to buy something and be done with it. If I use debt to buy something, I will continue paying for it, sometimes even after it is gone. Debt is the gift that keeps on taking.
   
3. Never paying a premium for something. How many of us routinely offer to pay 8-15% more than the price of an item? None. Yet, that is exactly what we do when we use credit card debt to buy. I prefer to get a discount versus paying a premium.
   
4. Stress free personal finances. I don’t like worrying about transferring credit card debt, whether I have enough money for an emergency expense or wondering if my check will clear. As I learned in Australia, “No worries.”
   
5. Retiring on my own terms. I’d like to retire well before 65 to enjoy more sunsets, family activities and learning opportunities without the pressure of wondering if I have enough money.

This is not financial or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Bootcamp to Become a Saver

During my first year of working, my checking account ran out of money three days before my next paycheck. Since no major payments were due, getting by on the next three days was feasible. However, I felt very uncomfortable about it.

Many people spend more than they make month after month. And they believe they are doing well financially. So they feel comfortable spending more than they make. Therefore, I know my experience sounds trivial to them.

My point is that people will continue to do something as long as they are mentally comfortable with doing it. If one really wants to reduce spending and start saving, one needs to very motivated to do it.

If you are ready to make a change, here is my bootcamp strategy for savings and reducing spending. It’s tough, requires strong personal commitment, but doable.

1. Pay yourself first. Save 12% of your before-tax income. Put money in a savings account that you won’t touch.
   
2. Pay down non-mortgage debt next. If your debt is about 10% your annual salary, target for a 2 year payoff. It will require about 7-9% of your after tax pay for the payoff. If you your debt is greater than 12% of your annual salary, you will need more help than this post can give and a customized analysis of your payoff schedule.
   
3. Run your finances on a cash basis. Cut up all your credit cards. Do not finance anything, including a car lease. Since you have already put 12% into savings, feel free to spend until you are out of cash. But once you are out of cash, stop spending.
   
4. Buy only what you need. Eliminate all unnecessary spending. As I wrote in an earlier post, eliminate or reduce regular expenditures like land-line/cell phones, cable, daily newspaper and eating out. Plow this money back into savings or debt reduction.

If you complete this bootcamp, you will be well on your way to building your personal wealth. Encouragingly, you will only need to do the first and fourth strategy on an on-going basis since you will have elminated all non-mortgage debt.

This is not financial or saving advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Similarities Between Building Wealth and Staying Healthy

In a recent discussion, my father-in-law and I noticed some remarkable similarities between the challenges and successful approaches for saving and dieting. I have summarized our insights below.

Success usually requires a lifestyle change. Short term solutions usually don’t work, because one falls back into old ways eventually. Saving needs to be integral part of the life you have, not a chore you hate.

Starting young helps. We pay for or benefit from the actions in our youth. Mickey Mantle once said, “If I had known I would live this long, I would have taken better care of myself (when I was young).” I expect that many retirees have said, “If I had known I would live this long, I would have set aside more money when I was young.” Recall, saving $1 per day for 30 years can yield almost $70,000.

Keep it simple. One colleague of mine successfully began dieting by just “getting rid of the junk” – i.e. doughnuts, candies, and other sugar filled items. Building wealth strategies should also be simple by focusing on one or two strategies – e.g pay youself first, buy only what you need.

Building wealth is for the long run. I want to be wealthy (and healthy) all of my life, not just for a few years. To use a metaphor, it’s a marathon, not a sprint. It’s better to finish the race, than to just win the first mile.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Debt Ratio Implications

Since I calculated my debt ratio of 1.71 a couple weeks ago, I have been thinking about its implications. My debt ratio being an outage was a surprise to me. And it has caused to rethink our strategy on our home mortgage.

Our only debt is our home mortgage. We do not have any car loans, credit card balances or other debt. So I expected to do very well versus the goal. However, since the debt ratio goal is 0 at retirement, any level of debt is an outage. Click here for more information on debt ratios.

In the past, I did not consider my home mortgage to be a possible barrier to retirement. I have a 5.375% 30 year loan. That’s great by any standard. And we have been making a 6X monthly payment against principal every year. This would be enable us to pay the mortgage is much fewer years than 30. (I haven’t done the exact calculation, but I believe it would get us close to a 15 year payoff.)

However, with a debt ratio target of 0 at retirement, my home mortgage is the only major financial barrier to retiring this very moment. So I am going to reconsider how fast I pay it off. To note, my financial advisor has recommended that I keep the mortgage, even in retirement. since he believes I can have sufficient investment income to cover it. However, being the conservative type, I would rather have no mortgage after I retire.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

How Much is Needed to Be Wealthy - THE NUMBER

My personal answer is when I have enough to be able quit my job and live on the money generated by my savings and investments. I can always to choose to continue working, but I don't have to.

In the past, I wasn't sure what THE NUMBER was. At one point, I thought it was one million dollars. Then that didn't seem like enough. However, I just read an article that defines THE NUMBER relative to our current income and expected life expectancy. "Personal Financial Ratios: An Elegant Road Map to Financial Health and Retirement" by Charles J. Farrell, J.D., L.L.M states that people can retire comfortably at 65 if they have saved 12 times their income, have been routinely savings 12% of their income since 30, and have zero debt. If they withdraw their savings at 5% per year they will have 60% of their pre-retirement income. Social Security will provide another 20%, giving them 80% of their pre-retirement income. This will work if they have been saving 12% and therefore, living on 88% of the income.

Of course, he makes the normal real rate of return assumptions (5%) and that Social Security will still be able to pay. Also, I believe that he assumes this strategy has a high probability of lasting the lifetime of the person. (I will do the calculation for a later post.)

This approach resonates with me. I have put in the numbers for my own situation and come up with what appears to be an accurate estimate. Also this approach allows me to adjust based on different assumptions. If I don't expect Social Security to exist, I should retire with 16 times my final salary to achieve 80% of my income. Or if I want 100% of my final salary, I should have saved 20 times my final salary. Now I can know MY NUMBER. And so can everyone else.

One benefit of this is we can all discuss our goals without sharing THE NUMBER. We can use the ratios. I show my targets for Savings Ratio, Debt Ratio, and Income Ratio in the sidebar. Since I don't expect to get Social Security and would like 80% of my income, my target Savings Ratio is 16 and my target Income Ratio is 0.80. Target Debt Ratio is always zero. If I hit these targets earlier than 65, I can retire.

October 7, 2006 Update - Based on an analysis done by my financial advisor, I have increased my target saving ratio to 20. For more details, see Updating My Wealth Ratios - Q3 2006.

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Getting Great CD Rates

In an earlier post, I wrote that I am currently investing a large part of my savings in 2-5 year CDs. The rationale for doing this is the model developed in the book Beating the Dow with Bonds, by Michael O'Higgins. (More on this in a future post.) About a year ago, the model recommended being in short term T Bills. I substituted CDs for T Bills and accepted the downside risk of CDs being illiquid.

I also wrote that I simplify my life by buying CDs through my brokerage accounts with Schwab and TD Ameritrade. This minimizes my record keeping and I can do all my orders over the phone. Also, the rates are pretty competitive, if not the top interest rates. In July, I was able to get a 6% 5 year callable CD through Schwab. There is no addtional commission either because the broker charges are already built in the CD rate. WYSIWYG.

However, I know that some people like to find the absolute best rate available. For this I recommend Bank Deals - Best Rates and Deals, a blog I first read today. The author shares his latest CD rate finds and how to get CDs online. Also, his sponsor links provide some great additional deals, by state.

Full disclosure: I have accounts with Schwab and TD Ameritrade. Otherwise, I have no financial realtionship with Schwab, TD Ameritrade or the Bank Deals blog.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Estimating the Value of Your House

I am not counting my home toward retirement savings. However, it is still interesting to know how much my home is worth. I hate those sites that require one to submit an e-mail address to get the information. In the past year, a new site, Zillow.com, was developed and it provides free housing value information without registrations.

Overall, the site works well. My home value is still close (+/- 10% over the past year) to what I paid for it in 2003. In some areas, Zillow can only provide tax valuation, which is much lower, verus market valuation. However, they expect to correct that outage over time.

So now we can watch the rise and fall our home values as easily as checking daily stock prices.

This is not financial or real estate advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Cash or Credit

Earlier I wrote that I buy only what I need and I pay with cash. There are two exceptions I have to the "pay with cash" principle.

First, we didn't pay cash for my house. We took out a mortgage for 60% of our house. We could have paid cash, but we didn't want to use up a significant portion of our savings. In 2003, interest rates were also at 5.5% for 30 year mortgages. However, we are working to pay off the mortgage in about 15 years. And we are considering paying it off in the next 2 years for reasons to be explained in a future posting.

Second we use a credit card for convenience. We charge most of our regular expenses (e.g. groceries, gasoline, clothing, gifts, and entertainment) to a credit card and pay off the entire balance every month. We use credit cards that have no annual fee and either points or rebates. I don't check the interest rates since we always pay off the balance. Currently, we carry only 3 credit cards and that may even be too many. We each have the card from when we were single, Discover and VISA. We added American Express because that is the only card Costco accepts. We never ever carry a balance nor pay interest.

On large purchases, such as furniture, appliances, or services, I always ask if there is a discount for paying cash. About 90% of the time, there is a 2-3% discount, which amounts to $20-30 per $1000 spent. My spouse is reluctant to ask for a cash discount, but I am always happy to ask. As a colleague once told me, the worst they can say is "no." And very few people are say no nowadays. If there is a discount, I pay cash. If there is not a discount, I use the credit card and take the rebate or points.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC

Building Wealth on $1 Per Day - New Calculations

After saying I would count on 6% annual return for my savings, I read that the stock market return since 1926 has averaged 10% annually. However, I still like to be conservative and use 6%.

I have now calculated $1/day saved for 50 years and 30 years and 10% and 6%.

50 years and 10% ----- $537,687
30 years and 10% ----- $ 69,632
50 years and 6% ----- $116,074
30 years and 6% ----- $ 30,713

I used the future value function in excel. Not sure why I calculated $537,000 vs. $425,000 in the article. The calculation shows how time and interest affect the outcome. Both are big factors. Since I expect to only have 30 years and get 6%, I would only have $30,000 saved. If I increase it to $10 per day, I will end up with $300,000 after 30 years.

I guess $1 per day was too good to be true. However, saving $10 per day @6% returns to get $300,000 still sounds like a good deal to me.

This is not financial advice. Please consult a professional advisor.

Copyright © 2006 Achievement Catalyst, LLC