The Value of $500

When trying to reach a large goal, it is important to break it down into smaller, more achievable, goals. This is how the realization of the power of $500 came to light. To most of us, $500 is not an insignificant amount of money. Yet, it is not an unachievable amount. Saving up $500 can be the gateway to achieving financial freedom. Let us explore how this would work.

Yield

In the traditional financial world, $500 yields a pitiable amount. Banks are offering 0.5% interest on deposits, which is a negative real yield taking inflation into account. In the realm of cryptocurrencies, however, a 12% interest rate is not out of the question. Stablecoins are earning this amount at Crypto.com. CRO coin also offers a similar return in staking. And, other platforms offer more or less the same amount. There are any number of options for earning yield in DeFi. And, Hive also offers a respectable 10% yield on HBD. So, what does $500 get you?

At 10% interest, $500 gets you $50 in interest per year. This sounds pitiful for a year of effort. But, let’s break this down into daily earnings. This is almost, if you round up, $0.14 per day. On a weekly basis, this is almost $0.96 in earnings. This is nothing exciting.

A Matter of Scale

If you can save $500, you can save $1000. That amount would earn you roughly $2 per week. If you scale this out, repeating in $500 increments 500 times, you will have achieved $500 per week. Your total savings would be $250K. Please forgive the insolence of suggesting that you save $250K. Surely, this is a large sum of money. Fortunately, you would not have to save the amount out of your own pocket. Your $1 per week per $500 in savings would help you achieve that amount sooner and at less cost.

Let’s say that you are earning $500 per month in interest rather than weekly. At that rate, you’d only need $60,000. At this level, with 10% returns, you would earn $1 in weekly income every single month. Certainly $60K is more achievable?

But, let’s scale that back. Perhaps even that amount is difficult to dream of saving. What if you could earn $500 every three months? At that rate, you would need $20,000 at 10% interest. Your weekly income would take longer to increase by $1, which would be every 3 months. But, you would speed things up by continuing to contribute to your savings rather than counting on the interest alone.

Saving $10,000 would get you $1 in weekly income every 6 months.

Hold On, This is Discouraging

This progression of lesser and lesser savings to earn $1 in weekly interest might seem discouraging. It takes too long. However, play this whole thing in reverse.

In a year, if you are earning $1 per week, that means you only have to save $450 to earn another dollar in income.

If you are earning $2 per week, then in one year you only have to save $400 to earn another dollar in income.

At $5 in weekly interest income, you only need to save $250 in a year to earn another dollar in income.

At $10 in weekly interest income, you only have to pay $125 out of your pocket in a year to earn another $1 in income.

The point is, that thanks to compounding, it gets easier and easier to earn that extra dollar in weekly income. It becomes less and less of a struggle. It costs you less and less to buy additional dollars in weekly income.

Saving $500 is the gateway to financial freedom. Rather than make a goal to save $250,000 or more, you can make it a goal to save the next $500. The maths say that every $500 buys you roughly $1 in weekly income. This works like a candy machine. You put in your coin and take out the candy. Except that in this case you get the candy every week.

Saving $250,000 might seem impossible. But, saving $500 is within reach. So, if you strive for the next $500, then the next, you can achieve a degree of financial freedom that would be respectable in many parts of the world. Earning $2000 per month in interest income is plenty to live comfortably in most countries. It all starts by breaking it up into $500 increments.

Even if you only achieve half of that, would $1000 extra per month help you? Would an extra $500 per month help? At some point, your weekly income becomes life-changing. This is an inflexion point in which the trajectory of your wealth starts to curve upwards at an increasing rate. It all starts with $500.