How to retire a millionaire
reprint of an article e-mailed to me- posted here for everyone’s perusal
Believe it or not you can retire a millionaire without marrying rich, inheriting a fortune or winning the lottery. Sure it takes focus, energy, knowledge and discipline but it is definitely not out of reach. Here’s how :
1. Save Regularly – Sounds simple and it is. All it takes is for you to save a regular amount each month and you will get to a million dollars. If you pay yourself first (ie save and not deviate from this you will do and remember the earlier in life you start the the quicker it will happen. For example a 20 year starting with nothing who saves $100 a month in a managed fund paying 10% interest will have $1,048,250 by the time they reach 65. Likewise if a 35 year old (also starting out with nothing saved up) saves $450 a month (earning 10% pa) they will have $1,017,219 by the time they are 65.
2. Listen 85% of the time and speak 15% – Learn as much as you can about money – read books, magazines, newspapers, attend seminars and talk to experts. The more you know about money the more confident you will become which means you will be more involved in your financial affairs and hence you’ll be able to manage your money much more wisely.
3. Watch every dollar – as every millionaire will tell you that you need to keep a sharp eye on your money and always be on the look out for ways to get better value. Be smart with your money. What ever you do don’t go splashing your money around once you start to accumulate it (keep on re investing it). A millionaire will buy quality but won’t lash out on flashy brands just to look the part or to impress their friends.
4. Have the right attitude – think positively and yourself set goals. Write down where you want to be in 5, 10 or 20 years time. Millionaires are positive thinkers and are not afraid of hard work nor set backs but most of all they have clearly defined personal goals. If you don’t have any goals now may be the time to set some up. It’s much easier to have a point to reach than just stumble along each day hoping to get rich.
5. Use some else’s money – don’t be afraid of borrowing money. Use debt to leverage your returns. If you’ve got a home loan aim to pay off it off as fast as you can and then use the equity you have built up to use to fund the purchase of an income producing asset (eg an investment property or a share portfolio). By doing so you will be able to create what is called a passive income stream whereby your investments (which are funded by loans) generate enough cash to pay the loan back and provide you with extra cash.
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorAll sounds good Redwing but when I am 65, $1m will be pocket change IMHO.
With inflation and other cost increases, $1m will not last long.
I like the ideas though[biggrin]
________________________
Bundy made me do it…..
That is great advice Redwing but as everybody can’t agree with everything the only one i did not agree on is to pay your home of quicker. (Pending circumstances)
Dom[biggrin]
Originally posted by redwing:How to retire a millionaire
1. Save Regularly – Sounds simple and it is. All it takes is for you to save a regular amount each month and you will get to a million dollars. If you pay yourself first (ie save and not deviate from this you will do and remember the earlier in life you start the the quicker it will happen. For example a 20 year starting with nothing who saves $100 a month in a managed fund paying 10% interest will have $1,048,250 by the time they reach 65. Likewise if a 35 year old (also starting out with nothing saved up) saves $450 a month (earning 10% pa) they will have $1,017,219 by the time they are 65.
Sorry to burst your bubble Redwing; I don’t think it’s possible. Managed funds do pay well, however you couldn’t possibly get 10% interest from the word go (i.e. with stuff all money int he account)!!!! That sounds crazy!!!! You’d have to have a huge amount invested before you got paid those kind of dividends.
However, if anyone out there can correct me on that, please please do, as I will make it my mission to go out and start up such a fund IMMEDIATELY!!!!
Jo
Thanks Rob,
I know what you’re saying, and the key word here, which can be easily overlooked is “risk”. It is not for everyone, and certainly not for the conservative investor such as myself.
Cheers,
Jo
Whats wrong with:
1. Save regularly
2. Learn as much as you can
3. Watch every dollar
4. Have the right attitude
5. Use someone elses moneyIsn’t this fundamentally what most people here are doing to achieve financial freedom.
The article “how to retire a millionaire” sure appears to be a little outdated and whether you achieve more or less than 10% soley depends on knowledge, risk, luck, equity etc.
Personally I would remove [1] altogether. This strategy will not result in independent wealth in terms of how a millionaire is defined today.
As pointed out, the future cost of money has not been taken into account. And 10% ROI is very high on a sustained basis and I am sure does not take into account inflation and other economic factors.
2. Critical.
3. I don’t agree with “watch every dollar” as such, otherwise time is wasted and opportunities can be missed. This is why accountants were created.
“Be smart with your money” is the rule to follow.
4. “think positively and set goals” – very important.
5. “Use someone else’s money – don’t be afraid of borrowing money.” “Use debt to leverage your returns.”
Two key factors in creating independent wealth, especially when starting from the ground up.
However, I do not necessarily agree with paying off your home loan as fast as you can. The reality is this recommendation is the complete opposite of what many “wealthy” people did in order to achieve their financial goals.
A couple of other considerations which have been overlooked.
6. Do not become focused on “money” – this in itself can lead to failure, in more ways than one.
Those who have created true wealth from the ground up have worked hard and focused on the tasks at hand, not necessarily how much money they will make – which falls into place.
7. As touched on in Monopoly’s response, one of the most important factors in obtaining true wealth is “risk”.
But it is important to understand that wealth is not gained through taking risks, it is how risks [which are a part of every transaction] are managed.
8. “Persistence” is the defining difference between someone who has created wealth from the ground up and someone who wishes they were wealthy.
— Michael
Michael R, summed it up perfectly, well said.
I think if someone cannot save, regardless of the type of investment used, they will never be rich, in fact they will likely never be worth more than their next pay packet.
Hi all,
One question I did omit to ask in my post was, when you say “retire a millionaire” are you saying with a NET worth of one million, or one million in liquid assets.
I would really appreciate some clarification here folks.
Cheers,
Jo
I think savings are essential to get to step one. After that I agree with Rob and feel that any more than an emergency slush fund in the bank is not working for you unless of course you are deliberately timing the market and choose cash as a vehicle.
Anytime there is a PPOR loan I would hold the savings in an offset so at least you are earning 6.5% tax free!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Speaking for myself only; ofcourse it will vary from one person to the next.
My targets are in $$$$ terms, i.e. passive income of X. This is important to me, simply because I know, that I will never qualify (nor do I want to ever depend on) the pension.
So far, my goals are up to speed, and I am able to pick and choose what I can and cannot do.
Jo
I would be super happy with that kind of money that was mentioned in the original post. Even if I could never afford a house in sydney- well, that’s bad luck- it’s good to be satisfied with one have. Striving constantly is not my goal in life- it’s to be happy with where i am now- every day ;O))
paul_s, you said if you can’t save, you’ll never be rich. That’s why I have investments- compulsory savings. Then it’s not my “choice”- it’s just something I have to do. It’s completely out of my hands. Like if a child had their pocket money put into a bank instead of the child spending it- that’s how I see RE. The bank is my mum, and each week, they take my pocket money- hehe. Childish? Yes. Does it work for me? Yes.
Jo, as for the pension… I agree, it will pretty much have disappeared when I am 65. But because I am employed, then my super will be a nice addition to any investments I have. I also want to have my properties paid off before I am 65- would be a bummer to still be paying out debt when you’re old- heart attack material.
kay henry
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