I am sure you must have wished at some point in time of your life that you had a million dollars in your account so that you never had to work again?
Isn’t that wonderful?
How about driving fancy cars, travelling around the globe? Many people dream about a life as happening as this… While it would certainly be nice to have such a lifestyle, people believe — they’ll never become millionaires and it’s just a dream. They have no clue how they can become one.
The truth is hitting $1 million mark is more reasonable today than ever.
A writer, Thomas spent 20 years studying American millionaires and patterns in their habits. The result of all his research was the bestseller, The Millionaire Next Door.
Even if you don’t have time to read this book, I think you are lucky and surely this post if for you !!!
– Always think “Long Term”: Try to harness the power of compound interest.
Long term thinking doesn’t only apply to your “Savings”, in fact it also applies to your spending patterns. There is a famous saying “Buy what you need, not what you want”.
To understand this, let’s do a simple math:
You must have spent $100 on a trivial stuff occasionally. Right? Everyone does, including me.
Now, instead of thinking it as “just a $100 expense for a month”, think of it as stealing $1,200 from yourself every year and approx $18,000 from you every decade assuming a 5% interest rate (which is way below the average of S&P 500 stock exchange) and reducing inflation.
So that $100 actually costed you a whopping $1800 ? Sound’s crazy, isn’t it? But how many times do we actually make these calculations?
Next time when you buy a Starbucks coffee, just think about it? This doesn’t mean that I’m asking you to lead a frugal life, however it’s just that your mind needs to be tuned.
Not that difficult, right?
– Open an Investment Account
This is a simple and mandatory step. Can you image to make millions without investing your money? Impossible.
In the above example, it is assumed that you invested the $100 which you saved otherwise you would be losing money due to inflation if you simply kept it as cash.
– Earn money from multiple sources, spend less and invest the rest.
Okay, it’s a fact that we all need to save money as much as possible. Earn money, spend less than you earn by living below your means, and invest the rest. Leaving aside your emergency funds, the money saved should be invested. You can consider to buy ETFS, Mutual Funds, or stocks based on your risk appetite.
I would suggest to go with ETFs as they are less risky, and will help you to get a decent return and become a millionaire. Note that all investments contain some amount of risk.
Calculation of savings per month to become a millionaire!
If you currently have $10,000 saved, you need to save $935.55 each month for 30 years at a 6.00% rate of return to reach $1,000,000.
That’s just apprx. less than $500 a paycheque if you are paid bi-weekly and after 30 years you become a millionaire.
This amount is even less as I have taken a very conservative Interest Rate. Each year your portfolio earns interest which will then be reinvested and interest can be earned on those reinvested funds!
– Do NOT withdraw your INVESTMENTS
Never ever withdraw your investments. Forget as if you never had that money. This should be your strategy. Numerous studies have PROVED that leaving your money invested over the long run is the best way to accumulate wealth.