I realize that you may have doubts about attaining a certain level of wealth during your lifetime, particularly if you’re currently struggling with financial issues.
Having difficulty making enough money to survive, feeling overwhelmed with debt, looking at a long list of things you can’t buy, and living paycheck to paycheck can take the joy out of life and deflate your financial aspirations.
Still, you can become financially independent quicker than you think if you start implementing some changes today and believe that you can, indeed, become financially successful.
What Does It Take to Make a Million Dollars?
With a little bit of money a month and some patience, you can make a million dollars or more effortlessly. The diagram below shows you how. You simply have to set the money aside and allow it to do its compounding magic.
For example, if you’re 20 years old, it would take $95 a month to reach that goal at age 65. Breaking it down even smaller, all you need is roughly $3.00 a day, which is less than the price of a latte to make a fortune by the time you’re old enough to retire.
Granted, the 10 percent compounding interest is not guaranteed. In fact, nothing in a typical Wall Street investment is guaranteed. A more realistic return would be 7 percent, which is the anticipated average considered by most professionals.
Yet, historically, the S&P 500 is known to return an average of 10 percent annually. For the moment, simply disregard the 3 percent difference and focus on the concept, which is more important.
If you’re older than 20, it will cost you a little bit more to reach your million dollars at the same time. But your initial investment will still be within the range of the amount of money you would spend mindlessly.
Statistically, we waste about 10 percent of our wages on nonessential items—money that simply disappears without a trace.
This means that if you bring home $2,500 a month, 10 percent of that ($250) will evaporate without accountability. Notice that this is far more than the $158 you would need to make the million dollars.
So, looking at the diagram, you have nothing to lose and everything to gain when you make the decision to take this important step in your life.
Also, notice that you would be starting from no savings—nothing—zero. This means that if you save $95 this month and repeat the process in subsequent months, by the end of the year, you will have $1,140 ($95 x 12 = $1,140). No interest is added to the amount yet.
This money would become your seed-of-wealth-fund—the initial cash that would form the base of your future financial empire.
Though you would typically start the process in a trusted bank, you would eventually move the funds to a higher profit-bearing account for bigger returns (more on that in a later post).
For now, though, the most important thing you can do is start saving some money. If you cannot save $95 now, start with $50 and increase the amount to $100 monthly. The more you save, the quicker you’ll reach your goal.
This Money is Not for Spending
There are various reasons for saving money: emergency fund, unplanned auto repairs, a vacation, and so forth. But what I’m suggesting here is not for any of these.
Though you should have an emergency fund (money set aside for unforeseen circumstances), this savings is a wealth-building program, one that will eventually pave your way to financial freedom.
This means come hell or high water, you should not spend the money for anything. It should NOT be used for a vacation, a down payment on a house or a car, and it should NEVER be used for impulse spending.
After all, what’s the point of starting a wealth-building program when the very seed money you need to work with is being used for something else? Developing such a habit would keep you broke for as long as you live.
Instead, you should allow the money to grow without interruption … almost forgetting that it exists, except when the time comes to manage the account such as adding to the balance or moving the funds to another account.
To be certain that this fund never gets used for something else, you should start saving two piles of money: a wealth-building fund and an emergency fund. For example, if you cannot save $95 in your wealth-build fund without sacrificing the other, put $50 in one and $50 in the other. Then repeat the process each month.
What Happens if You Do Nothing?
If you currently have no savings, you probably have many reasons why you couldn’t do it: low wages, things are too expensive, debt is too high, etc. With this attitude, you’ll remain broke until you change your perspective and take action to remedy the problem.
While you hesitate on making changes, you may end up relying on credit to make ends meet until your debt balance become unmanageable. When this happens, you’ll be forced to seek help to resolve the issue or file for bankruptcy.
Even then, you may find yourself in the same predicament roughly ten years later. Why? Finding hurdles for NOT saving money is a self-inducing belief. In other words, if you keep using excuses to save part of your paycheck each month, they’ll never go away.
Ultimately, they’ll become your reality without even trying. Meanwhile, opportunities to save money will pass you by as you keep wishing for the day when things will get better.
Years later, you’ll think about all the money you made and wonder why you didn’t save any of it to make your financial dream come true.
Today, you have the power to prevent this tragedy from happening. All you must do is stop spending your entire paycheck each month and start saving some it. This initial savings will eventually grow with compounding interest all the way up to a million dollars or more.
To learn more about how to make a difference in your financial world, consider reading my new book: Pennies to Power: How to Use Your 20s to Gain Financial Independence for Life.
Thanks for reading.
What Are Your Thoughts?
Who worries more about money: those who have plenty of it or those who don’t have enough? Do you agree or disagree with the following statement: “Just about everyone has the opportunity to save money, even a small amount…initially. Those who don’t are making excuses.”