Everybody wishes to make 100K dollars every year. And it’s certain that everyone will be so pleased if they get this entire amount without even working or worrying about it. Moral guys say that if you want money you have to work sincerely for that (simply hard work!). Instead, it’s impossible. But the reality is that it is possible and is very simple as well. What we are lacking is financial literacy. Well, I will show you how to make 1 lakh US dollars every year without even working for it.
This article will show you how to harness the power of compounding to make a frequent money source. Actually, the matter that I am going to explain is familiar to everyone but nobody thinks that much deeper.
The average salary of an American is around 51168 USD per year (this value changes). According to the ratio of better financial handling, 20% of the money you have, ought to be kept for saving. That is, according to the average income, $10233.6 is what an average American gets to save.
let’s save our money of 10233.6 per year in an investment plan with a fixed 10 percent annual interest (under compound interest). If we deposit our $10233.6 for 40 years, then our money growth will seem something like this:
it’s so huge. If you have started it from your 25th age then you have $4992187.58 in your account at the age of 65.
Now let’s take into our consideration the way of making constant $100K money every year. For that, you have to deposit the amount of $10233 every year for up to 24 years, and after you can able to get $100638.5 per year from interest. You can, every year withdraw constantly this $ 100638.5 from your account and your account stays always with the balance of 1006385.46 USD.
Here’s the table which reflects what I’ve explained:
If you started this investment at the 25th age, then you will able to attain this stable income of 1 lakh dollars at the age of 50, solely created by your invested money.
Remember: This is the only case of the person who gets 51168 USD annual income. you can invest more according to your income (take 20% of your income for this).
Where will I get a 10 percent interest per annum?
In the whole section, I’ve said only about the scheme which provides 10% annual interest. I didn’t mention where we will get that kind of scheme. In the banks, it is less possible. commonly savings accounts in banks are around 4-5 percent annual interest. Even if you choose fixed deposits or recurring deposited or anything such, still you will only be able to get around 7-8 percent maximum.
It is equally important to choose better investment options that provide better money growth that could beat inflation and give a good return.
The easiest and preferred way is by investing in the stock market. This is mainly because of the fact that the annual return in the stock market is, on average, greater than 10 percent. It is true that the annual return may not be fixed for all the years. But it is not as risky and could give almost fixed growth if you choose a stable company to buy stocks in. You can invest in stock indices if you want to play with minimum risk. US stock indices such as S&P500, Dow Jones Industrial Average, Nasdaq Composite, etc could give you almost fixed capital appreciation(around 10 %).
Here, I have given the historical annual return table of the S&P 500 index from 2012 to 2023. The stability is evident from this table itself.
Attention please: The time when I created this table is march of 2023. So the annual return of 2023 is according to these three months’ growth only.
The negative change in the indices represents the weakening of the American economy in that particular year. And we all know that the US economy will never ruin down. As a consequence, you can trust your money invested in these indices will not go that much down to give you a loss.
Investment is a better way to make your financial life a little bit more-sweeter. Starting the right investment can be treated as a good trait of yourself being financially literate. Compounding is so powerful that it can give you frequent income itself if you use it in the right manner. All the best from Marketnasium.com.
Early investment has many magics therein it. The timely investment has many great benefits that on explaining will definitely blow your mind. Know the magic of compounding and make your life one more step up. Click here to read the dedicated post.