Which one of the 5 options would you choose to make your easy $1 million? I hope you said, “none” because that’s the most sensible choice. Fortunately, there is another way and here it is:
Save and invest $1,500 a month, every month, for 25 years*.
It sounds dull, doesn’t it? Do that, though, and, if the future is anything like the past, there are reasonable odds are you’ll be a millionaire in 25 years.
And not just a paper millionaire, either. You’ll have assets you can use to live on. Best of all, since you’re used to living modestly, the 4% safe withdrawal will give you an income of $40,000 a year for the rest of your life (adjusted for inflation, naturally).
Notice I’m not talking about buying a million dollar house here. That approach won’t really work because you’ll be paying interest on the giant loan that will offset all the interest you’re supposed to gain by investing. You might make money that way, or you might not but it’s not a reliable path to millionaire status other than on paper.
The second problem with the house is that you need to live somewhere. How likely are you to sell your dream house after 25 years of fixing it up? And where will you move then, something more basic but affordable? No, the big house is doing it backwards.
The right way is to live modestly, work steadily and well, and make regular and substantial contributions to your millionaire fund as early and often as possible.
Sure, you might have to give up some things at the beginning but it’s a bit like buying that house. At first, the mortgage payment is all you can manage. Later, as your income grows, it becomes easier. That $18,000 per year is the same way.
If $18,000 per year sounds like a lot, well, it depends on how badly and how soon you want the $1 million. If you want it in just 25 years, that’s your number.
If not, set your sights a little lower or your time horizon a little later. How about this formula instead?
$900 per month for 30 years*.
You could do that, couldn’t you? A cheaper car, smaller home, skip the giant screen TV and the latest gadget, eating-in more often, and dropping some pay channels would get you most of the way there just today. Remember, it’ll get easier over time, too.
The numbers get even smaller if you’ve got 35, 40, or 50 years.
Imagine what would happen if you started a retirement fund for your children at birth. Invest $81 per month in a low-cost S&P 500 index fund and they’ll retire at age 65 with an inflation-adjusted million in the bank. Why we aren’t all doing that for our kids?
Looking back, if you had started such an investment program 25 years ago, you would have that million in the bank right now. Makes me wonder what I was thinking back then…
- See more at: http://happinessinternational.org/how-to-get-rich-the-easy-way-to-millionaire-status/#sthash.xjBoEgyd.dpuf
