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Comment by CamTin | Hacker News Reader

I can't find a way that $500 per month adds up to "multi-million dollar net worth". Even at a very optimistic 10% return rate, it comes to just over 1.1 million over thirty years. What assumptions are you making in your calculation to come up with 2million+ at retirement from $500 per month of savings?

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... and how is spending $0 on transportation a reasonable solution, anyway?

It's not. Even if you walked to your job. The additional money you would pay in rent / time / uber is not worth it. Just buy a car unless you live in an actual pedestrian city.

In order to finance a dollar of monthly spending, you need roughly $300 invested. Actual returns are generally somewhat higher, due to requiring a lower amount of variance to handle sequence-of-returns risk in distribution, but the rule of thumb holds. Which suggests the car-buying habit puts you roughly $150k in the hole.

$500 a month is $6000 a year. $6000 a year invested from 26 to 66 at 10% interest per year is $2,921,110.87. At 12% it's $5,154,854.34.

Keep in mind this is just from a single decision the average person is making.

And isn't that 10% and 12 % growth assumption the reason all pensions are in trouble?

Just for clarification, where is 10% interest coming from? Mutual funds? 401k? Something else?

Serious question, I am not financially knowledgeable but I know you'd never get 10% interest in a savings account (for example).

Mutual funds / index funds / real estate

WTF kind of fairy land is this? 10% is already a dream, but at least it's a round number, unlike the 12% you just arbitrarily threw out there.

So you're expecting people to make 10-12% in after-inflation returns?

Making 7 to 10 percent after inflation is possible and it is sufficient to amass more than 1 million dollars by retirement just from changing this one habit. The point was that the average financed car is worth a massive amount in opportunity cost.

Ok so you're assuming 40 years instead of 30. That's where the discrepancy is. Thank you for clarifying.

Yep. You can also assume 45 years if someone starts working at 20 and retires at 65.

Not many places offering 10% ROI to people who can invest $500 a month.

So invest it as $6,000 per year. Doesn't have to be $500 per month.

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