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8-2 Compound Interest CH 8]

retirement fund. If the monthly income received is $4,000, then ($4,000 x 0.10 =) $400 is set
aside for the savings and investments retirement fund. Then again, if the monthly pay is
$10,000 on each paycheck, then ($10,000 x 0.10 =) $1,000 is set aside for the savings and
Tithe: one tenth investments retirement fund.
(10%) of annual Let’s get personal. When you start your work life your paycheck will be smaller than it
produce or earnings; will be 50 years later when you retire. Current labor statistics indicate that the work life is
formerly taken as a
tax. A good savings calculated from age 18 to age 68. Being disciplined and diligent about a savings and
plan of setting aside investments plan, then your tithe plan will remain the same percentage, 10%, even though
for savings and your paycheck increases. Your paycheck will/should increase because (1) over time you
investment and become more valuable because of increased and continual education, and work experience; (2)
should be taken first inflation will cause your paycheck to increase; (3) you change employers for more interesting
in a disciplined work, and higher pay, and (4) because of the economic opportunities. You may even go into
budget and then live
off the other 90%. business for yourself, and your tithe remains. Know that as your 10% deduction (set aside)
remains’ constant, and as your pay increases your dollar contribution to your savings and
investments retirement fund also increases. Your goal is to increase your wealth; to increase
your personal savings and investments retirement fund. It is best to begin your tithe now, and
don’t wait for something else to happen!
Wealth is created by you and anybody else in the same old fashioned way, which is
working diligently daily over time (years) to reach the end. Squandering your investments
means that you will not have the retirement that you deserve and will be left to living on Social
Security. Consider this, if before you retire your monthly paycheck is $5,500 congress has
established at this time that your social security benefit will be $2,100 per month; that is quite
a bit less than your paycheck. Know that congress can reduce this monthly payout as they
desire. History proves that social security does not even keep up with the increasing cost of
living. Inflation will eat away at your retirement and you will discover it even more difficult to
make ends meet.
Now, you are so dedicated to this tithe to yourself that you will not let anything reduce
your savings and investments retirement fund. You realize that this money is NOT TO BE
USED for purchasing a car as that should come from the other 90% you receive in your
paycheck. Your savings and investments retirement fund money is NOT TO BE USED for
paying for your children’s education as that should come from the other 90% you receive in
your paycheck. Your savings and investments retirement fund money is NOT TO BE USED for
a vacation trip that you are planning to take as that should be saved for from the other 90% of
your paycheck. You realize that your savings and investments retirement fund should ONLY
BE USED for when you retire. This is a long term, work life, dedicated, disciplined
commitment for saving; and in the meantime, as you contribute to your savings and
investments retirement fund, and as you are the manager of your fund, you will consider
various investment possibilities such as “how can you invest and receive at least 8% return on
your investments that are compounded monthly or quarterly?”
Does this tithing discipline really work? Only if you use it! This discipline requires you to
become diligent with your money affairs, allowing nothing and no one to distract you. If you
don’t use it, it will not work.
Value of a 10% savings retirement plan: Figure 8.1. Let’s assume that your paycheck
is $3,000 per month; your tithe for savings and investments is 10%, that you set aside ($3,000
x 0.10 =) $300 from each paycheck. Presume that you invest it wisely and receive an average
of 5% interest, compounded annually; even though the money market has its ups and downs

Total Annual Earned Accumulated Account
Year Contribution Contribution Prior Years Total Interest Earned Interest Value
10 $36,000.00 $3,600.00 $46,139.21 $49,739.21 $3,481.74 $17,220.96 $53,220.96
20 $72,000.00 $3,600.00 $143,983.77 $147,583.77 $10,330.86 $85,914.64 $157,914.61
30 $108,000.00 $3,600.00 $336,458.83 $340,058.83 $23,804.12 $255,862.95 $363.862.95
40 $144,000.00 $3,600.00 $715,086.40 $718,686.40 $50,308.05 $624,994.45 $768.994.45
50 $180,000.00 $3,600.00 $1,459,904.15 $1,463,504.15 $102,445.29 $1,385,949.44 $1,565,949.44

Figure 8.1 Value of 10% savings retirement plan with a 5% Interest return

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