Snowballing Your Money

I wrote this "strategy" to a fellow BP member, and I thought why not share it with everyone on BP?

So, the concept is Snowballing Your Money.  And here is the basic outline:

1.  Set up a self-directed Roth IRA (remember, your contributions to your Roth IRA are with after-tax money.  Whatever you can grow it to is all yours to keep).  If you make too much money, a self-directed IRA or 401(k) is fine.

2.  Pay yourself $416.66 per month.  Since the Roth IRA's annual contribution limit is $5000, $5000 divided by 12 months is $416.66 per month.

3.  After a while you should have some working capital.  Let's say you have $25,000.  You can buy a note that looks like this:

N = 120

I = 7.0%

PV = $30,000

PMT = $348.33

at a 12.0% yield for $24,278.46.

Now your Roth IRA will grow by $764.99 ($416.66 + $348.33) per month.

4.  After 24 months your Roth IRA will have an additional $18,359.76 to work with.  You might say buy a note that looks like this:

N = 60 

I = 6.0%

PV = $20,000

PMT = $386.66

at a 12.0% yield for $17,382.14.

Now your Roth IRA will grow by $1151.65 ($764.99 + $386.66) per month.

See where this is going?

And remember, because it is a Roth IRA, you have already paid your taxes, so whatever you grow your Roth IRA to, is ALL YOURS, TAX-FREE.

Just imagine what your Roth IRA will look like once you are getting paid 10 times per month.  20 times per month.  50, 100...