Times are rough right now in this Coronavirus world. And if you’re watching the money you invested disappear before your eyes, we get you might be in a slight panic. But as markets around the world plummet this presents a once in a lifetime opportunity to get yourself set up for the future.
As Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.”
With that in mind, here’s the quickest way to become a millionaire once the dust settles. Oh, and as you’ll see, it’s not as unrealistic as you may think… if you’re a millennial.
Here’s what you need to know.
The younger you are right now, the easier it is going to be and also, it’s going to cost you much less than anyone else.
Let’s say you’re an 18-year-old Gen Z-er – a generation all under-24s fall into – to net a million is only going to cost you about $135,360 if you start now. That’s a staggering $401,280 less than a Gen Xer.
Ok if you’re like, “wait what! Did you say it’s going to cost me $143,820! I just spent my paycheck on this smashed avo on toast!”
Yes, we did, but ain’t’ nothing free in this life, so be cool because there’s a cherry on top. You’re going to get the other $863,607 for doing zip. Did that get you sitting back down? Yep, it’s going to feel like you’re a Kardashian at Christmas.
So, high fives to you over that smashed avo on toast. You got this!
Here’s the trick.
If you’re 18-ish and you start putting away $240 a month ($60 per week), by the time you are 65 you could have over $1 mill. Of that, you will have made roughly $879,178 courtesy of just waiting it out (and conscientiously putting away your monthly instalments into some secure investments that average a 7 per cent return). And assuming you do average a 7% return, you should have a spare $14,538 to play with on top of your one million dollar target.
If you’re a GEN Y you could get around $730,434 cream on top of your $23 a day investment. Money for jam!
Now, if you’re feeling daunted about ever becoming financially secure, stop!
If you’re under 50, you still possess an asset so life-changing it makes older generations green with envy… one that, chances are, they have unwittingly squandered.
Drum roll please… that asset is time. And if you harness it, you can be a millionaire far cheaper than any older generation. The reason ‘time’ is such a potentially lucrative asset to us all is a little mathematical phenomenon called compounding.
Compound interest = your money x (1+i)n
Hate math but like money? Read on.
This works like a snowball. As you roll it in the snow, it becomes bigger and bigger. Then before long, bam! You have a snowman.
Here’s how that all looks in a really simple table. It lays out the lowest possible amount of money you need to put away each month (starting today) to retire a millionaire.
*Based on 7% returns compounded annually with money re-invested.
Thanks to compounding (the process of rolling up your returns and earning interest on the interest on the interest), the longer you leave it the better it gets… and the less it costs to grow. So when people talk about a hands-off approach, this is it. All you need is will power.
Fun fact: Albert Einstein famously said compounding interest is the most powerful force in the universe…“Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it.”
Remember, starting is the hardest part. But the sooner you start the easier it will be. Oh and if you are like, “65 is so far away, why would I bother?” Well, there are 3 reasons:
- Because you will be filthy rich.
- This most likely won’t impact your lifestyle at all. Especially as you grow older.
- You can always get there faster if you want to put some effort in. For example, If you are 18 now and you start with $240 a month but increase this by 10% each year, you should hit a mill by the time you are about 48 – so you’ll have plenty of time to retire early and plan how to blow $1m on a monster 50th party.
Start today by finding free money or see how much you can borrow or save on your homeloan with Henry.