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 Have you ever thought about how much money you would have if you saved the $2 you spend on coffee every morning?
What if you start with just $2 and were able to double your money every year thereafter?
How much would that be worth in twenty years?
| Year |
Amount |
| 1 |
$2.00 |
| 2 |
$4.00 |
| 3 |
$8.00 |
| 4 |
$16.00 |
| 5 |
$32.00 |
| 6 |
$64.00 |
| 7 |
$128.00 |
| 8 |
$256.00 |
| 9 |
$512.00 |
| 10 |
$1,024.00 |
| 11 |
$2,048.00 |
| 12 |
$4,096.00 |
| 13 |
$8,192.00 |
| 14 |
$16,384.00 |
| 15 |
$32,768.00 |
| 16 |
$65,536.00 |
| 17 |
$131,072.00 |
| 18 |
$262,144.00 |
| 19 |
$524,288.00 |
| 20 |
$1,048,576.00 |
| For illustrative purposes only. Not indicative of individual results. Assumes reinvestment of dividends and no effects of fees and taxes. |
That's right! After twenty years it becomes a whopping $1,048,576.00.
But now let's look at the tax implications.
Let's say that you fall within the 28% tax bracket. How much will the same money be worth in twenty years assuming taxation.
| Year |
Amount |
| 1 |
$1.72 |
| 2 |
$2.96 |
| 3 |
$5.09 |
| 4 |
$8.75 |
| 5 |
$15.05 |
| 6 |
$25.89 |
| 7 |
$44.53 |
| 8 |
$76.60 |
| 9 |
$131.75 |
| 10 |
$226.61 |
| 11 |
$389.77 |
| 12 |
$670.41 |
| 13 |
$1,153.11 |
| 14 |
$1,983.34 |
| 15 |
$3,411.35 |
| 16 |
$5,867.53 |
| 17 |
$10,092.15 |
| 18 |
$17,358.49 |
| 19 |
$29,856.61 |
| 20 |
$51,353.37 |
| For illustrative purposes only. Not indicative of individual results. Assumes reinvestment of dividends and no effects of fees and taxes. |
Whoa! Hold the horses. What happened to your $Million?
Taxes are what happened. Now, the compounding you gain in doubling your money is offset by paying 28% every year.
Stay tuned for the next lesson when we will teach you how to minimize your taxes.
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