How To Save Up Six-Figures In Seven Years (with spreadsheets!)

You guys were so stoked about my spreadsheet post about how to save $10,000 that I decided to make an even better post for a goal that takes even less work.

If you have Numbers on your Mac, the template for this spreadsheet is available for download by clicking here.

How would you like to save up six figures in 7 years?

If you hesitated at all before answering that, let me ask you a few questions:

How old will you be in 7 years? 30? 35? Will 30 year old or 35 year old or whatever age you like to open their bank account and see $100,000 in there? Does 30 or 35 year old want anything $100,000 might help them with, like a downpayment on a house or starting an RESP for a mini-you? (You might have kids by then, I don’t know your life)

All I know is you’re probably not the person that’s like “No thanks, I don’t want $100K, I would rather have nothing”, because those people probably don’t exist, so therefore this post is for you.

Now if you’re feeling doubtful at the “less work” statement, I mean it: it is easier to save $100,000 in 7 years than it is to increase your net worth by $25,000 every year. I’m so good to you.

However, before we continue, there are some things I want to address:

You have to be willing to put away at least $1,100 every month.

If you didn’t think you’d have to make any sacrifices to save up six-figures in seven years, that is problematic. Well, too bad, that’s just the amount it takes.

If you can’t save quite that, I’m doubtful that 7 years from now you’ll send me an angry email complaining that you only have $85,000 in the bank instead of $100,000 (and if you do I’ll just LOL and delete it), but that’s your prerogative. Much like the Net Worth post, people balked at the amounts required to make huge financial gains. You can’t fight math, friends. We all want to, but we can’t.

*note: if you did some math and realized you would actually need to save $1,190 per month to save six figures in seven years, read on for lessons in the magic of compounding. 

You have to invest in the stock market.

I know, investing is scary. You don’t know what all the acronyms and ratios mean, and a ticker stream is just one meaningless number after another. The stock market is actually terrifying. I’m going to need you to stop being afraid of it and start learning the ropes.

You don’t have to do anything drastic — you can dump all your cash into a handful of index funds for all I care — I just need you to invest consistently and get a return of at least 5%. This is NOT unreasonable, especially if you account for dividends and growth. If you consistently reinvest your returns your portfolio will grow exponentially. Mine is currently up 25% on my initial investment, and while I don’t think those gains will continue indefinitely, it does make a case for 5% being a totally reasonable expectation.

You can’t take money out of these accounts

I’m serious! You can’t make a withdrawal for any reason. This is really important because if you take money out, not only do you set yourself back that amount, you miss out on compounding interest, and compounding is very very very important to your success here.

Life is full of ironic twists…

Know what’s not fair at all? It will be challenging to save $1,100/mo on a small salary, but in year 7 after you’ve enjoyed some raises and career progress, $1,100/mo will be easier to swallow.

If that’s not unfair enough, the $1,100/mo in your first year is worth more than any contributions of the same amount after it because it has the longest time to compound. This brings us to a very important financial rule that you’re going to want to write down for yourself:

Save the hardest when it is the hardest to save.

(I’m also a fan of “pray the hardest when it is the hardest to pray” but that won’t get you any dollars)

I cannot be held responsible for bank interests rates or market downturns

Try as I might, I cannot predict the future. Stocks will go up and down and sideways over the next 7 years. You might watch your investments sink during years 5 and 6, then rally back to life in year 7. Interest rates on savings accounts might go over 2% someday (haha) or they might fall even further than they are now.

It’s easy to make guesses for the next year or two, it’s more difficult to make them for the next 7. I don’t know what’s going to happen to your money. I do know that this model I’ve set up keeps 64% of your contributions in savings accounts which means it can’t be lost.

As a generally risk-loving person, I feel extremely generous providing you with this much safety so it’s just best to pat me on the head and move on and construct your own savings portfolio however you like. If you only want to put 25% or 10% of your money in stocks, fine. You’ll have the safety but you will probably lose far more than you gain. Remember that this money is for wealth building. You’re not saving it up for a nice Mercedes, you’re trying to achieve financial independence.

So here we go.

Your goal is $100,000. I’ve already done the hard math which I will just show you instead of walk you through every step.  Instead, we’re going to be starting with where you’ll start, and that’s with your savings:

If you’re Canadian, you should absolutely be saving in an TFSA, and if your income is high enough to justify it (and honestly if you have $1,100/mo to spare it probably is) you should also be saving in an RRSP. I have TFSA and RRSP savings accounts, but I also have TFSA and RRSP brokerage accounts which I simply label “stocks” in my mind, even though they are separated and both are registered accounts. You can split up your savings however you like and into whatever investment vehicles you choose.

*note: I chose $450 for monthly TFSA contributions because there are limits to how much you can contribute each year. $450/mo will amount to $5,400 per year, which is just under the $5,500 limit. If you have unused contribution room in your TFSA you can contribute more. Contribution limits may also change in future years.

You’ll notice the “Total” gives us $1,100 per month at an interest rate of 2.70%. The interest rate of 2.70% is a blended rate, and will change proportionately to how much you put in each account. For example, if you decide to put $100 less into your RRSP savings account and instead use that money to bring your stock contribution up to $500, the contribution in each of those columns will change and the overall interest rate will go up because you’re putting more money in the higher return stock account:

This will also change the final value in your accounts at the end of Year 7, which might encourage you to make changes to your investment plan. The most important thing is it lets you play around with different values and contributions and give you a predicted outcome so you can see how decisions now will impact you in 7 years. It’s awesome.

What this rainbow nonsense conveys is each interest rate contributes to the overall interest rate proportional to the monthly contribution of that account, then you sum the total. For example, the interest rate on my TFSA is 1.4%. This is multiplied by the monthly contribution of $450 over the total contribution of $1,100. The $450 monthly TFSA contribution represents 41% of our total $1,100 monthly savings contribution, so therefore its interest rate of 1.4% also represents 41% of the total blended interest rate of 2.70%.

If this doesn’t make any sense, don’t worry, just copy. The important thing is that the interest rate will adjust appropriately based on your contributions and the returns of each account.

You can see that at the end of 7 years, you’ve exceeded your savings goal and banked $101,575.32, well done! Furthermore, you’re earning over $2,500 per year in passive income — that’s over $200 per month! Would you like $200 a month without lifting a finger? Yes, you would.

I’m going to show you guys how to work this table now.

In January year 1, we’re assuming you’re starting from the bottom so just put in your contribution for that month: $1,100. If you already have some money saved up, by all means go ahead and put that figure in and watch the table bring you even more joy! For February of year 2, we’re going to contribute another $1,100 and collect a small return on our investment from the month prior. The formula is this:

This indicates that our February total will be: the money will put away in January compounded at our blended interest rate (divided by 12 because it’s an ANNUAL rate, not monthly) plus our regular total monthly contribution.

You can drag that formula down to fill the rest of Year 1. Make sure your values for the monthly contribution and interest rate are anchored with $-signs, or your table will get confused.

Starting January of Year 2, we want to use our value from end of Year 1 in our formula.

Drag that formula across at the Januarys (Januaries?) for Years 3 through 7. Do not drag it down. Your February of Year 2 should have the same formula as February for Year 1, so just drag that formula from Year 1 across through Year 7. Fill the rest of the table and it will be a work of art!

I decided to add one extra row at the bottom to show passive income. While I understand percentage returns, I find it more motivating to see the actual hard numbers for my cash. Passive income each year is really easy to calculate: it’s just the total in the account at year end, minus the starting value, minus total contributions (which is monthly contributions times 12).

Cool right? I’m a huge fan of passive income so I like to see how much I’m earning each year. It’s pretty amazing to see $2,500 coming in by Year 7 — that’s more than 2 months of regular contributions! This is why saving & investing is important, guys. It makes you rich.

The table will automatically update every cell as you change your numbers. I always like auto-updating things because it saves me time (and I’m very lazy) and also because spreadsheet programs make far fewer mathematical errors than I do.

I always convert the amounts in months that have passed to text instead of a formula. That way if interest rates or my contributions change, it will only change the formula in subsequent cells and not manipulate months that have already passed:

This also keeps the forecasted amounts in future cells more accurate, since they’re based on amounts of previous months.

And there you have it! How to save up six-figures in seven years!