This article shows you how much it will pay off if you take care of your own finances, and what a great advantage it is to increase your own pension account with regular savings rates.
Pension insurance is outdated
Pensions and life insurance are certainly not a bad way to hedge privately over the statutory pension, but the returns are negligible. Assuming one pays $200 per month for 30 years, then you will end up having probably not more than $90,000. This is already an optimistic assumption. However, if you were to manage the same money yourself, you will quadruple the amount with a little time, patience and discipline invested on your side!
Of course, although one may argue such insurance being very advantageous for tax purposes, this advantage does not outweigh the huge disadvantage with the poor return by far.
It should not be concealed at this point that learning to manage your own money may be a bit bumpy and difficult in the beginning, but in the long run, it is worth it.
Save funds or decide for yourself?
Of course, arguments such as, “But I invest my money passively in a fund and also earn decent returns.” On one hand, this step is very praiseworthy because it shows that you are already taking care of your finances and dealing with the financial world.
On the other hand, if we take one step back and look at the facts in detail, it quickly becomes clear that these fund savings plans have a few minor disadvantages:
- An administration fee is due on a regular basis
- The return on average is only about 6%
- Fund managers are bound by certain rules and regulations, they cannot always freely react to market situations
10% a year is not rocket science
There are many strategies that can deliver an annual and long-term return of 10% or more with very little time. We ourselves apply these strategies to our $100,000 real money account and are firmly committed to providing this knowledge to anyone who is willing to take care of their finances with their own hands.
Even a small start-up capital expands massively
Since we do not want to talk about active trading with a lot of time and do not want to live on it, but just want to generate a very decent pension, the starting amount does not have to be huge either. Let’s take a close look at the final capital if we start today with $5,000 and generate an annual return of 10% over a period of 30 years.
The calculation is very simple, it can also be done via the calculator on our homepage https://learn.tradimo.com/. The result may surprise you, the number is actually close to $90,000 together, which corresponds to a total performance of 1,800%!
By comparison, within the same timeframe, a savings account would only typically help you reach $6,800, which corresponds to a total performance of a meagre 36%.
Regular saving and investing leads to an amazing explosion of the final capital
Now comes the most exciting part, if you also have a monthly saving rate, due to the compound interest effect already mentioned in the previous paragraph, the final capital will literally explode. See the logic below:
Assuming we add a monthly savings rate of $100 to the previous example with the $5,000 capital, the final capital will be over $280,000.
To make it clear again: You pay initially $5,000 and then for 30 years monthly $100. In total, that makes $41,000. From a total investment of $41,000 will lead to $280,000 in the end!
Anyone can even play around with our calculator at https://learn.tradimo.com/ and make the appropriate entries for themselves.
The following overview shows you which end capital awaits you if you have seed capital X and savings rate Y:
For example, if you have a starting capital of $2,000 and a monthly savings rate of $50, then you have a final capital of $133,500 after 30 years.
However, one thing is rock solid: it is worthwhile to start learning to handle your own finances.
Of course, you do not want to spend a lot of time managing your finances, which is one of the reasons for leaving it to others. But we can give you the knowledge you need to effectively and joyfully learn what is important. Of course, the initial amount of time required at the beginning of the learning curve is greater than it will be later with more routine.
We personally invest about 40 minutes per week in managing our retirement savings, which is not very much.
How do I learn to handle my finances most effectively?
Tradimo provides you with all the necessary materials to successfully start investing. In addition, our premium service offers you many exclusive benefits that will help you more effectively and provide you with personal support.