Today you’re going to find out exactly what you’ll need in order to become a Millionaire at your desired age. You’ll see how manipulating the three aspects we talked about in the last post:
Dollars invested
Rate of Growth
Time
Affect your desired outcome. Remember, we want to continually feed that compounding machine right up into retirement, with the ultimate goal of living off the gains in our investment account. Some people call this your nest egg. I’d rather call it your Dream Fund, because that’s what it will allow you to do: live your dreams.
For some of you, this will be a wakeup call you need to start kicking your butt into high gear. You may not be currently on track to reach your goal, and you’ll need to do a quick course correction. To do this, you’ll likely need to either start saving more, or dive deeper into learning how to invest to increase your growth rate. Whichever route you decide, I’ll be here to help you along the way. After all, I’m on the same path as you, working my way to that $1,000,000.
I also want you to get it in your head that this is absolutely achievable. This is not just a pipe dream. You will be a millionaire. If you start learning how to do this today, it’s not a matter of if, it’s more a question of when. You are the only person who gets to decide this. In other words, the sooner you get started, the better.
Some basic facts before you get started:
The average market return over the 500 largest companies in the US over last 100 years or so has been around 8%. In other words, if someone could have bought all those companies, they would have seen an 8% increase on their money every year (remember how compounding works?). This is the number you should use for your rate of growth. It’s the amount I’ll teach you how to achieve as a passive investor, so let’s stick with that for now as your ‘expected rate of return’.
For those of you who are willing to learn to properly invest in individual companies, use 15% per year as your expected rate of return. This is the number I believe you can achieve with the right training and education. But you’ll see the tremendous impact this knowledge can make on your account. This is only for those of you dedicated and willing to learn how to invest like the best investors in the world (it’s going to take hard work). I think It’s well worth the work upfront.
If that’s not you, stick with 8%.
(My personal goal is 24% a year. Ambitious, I know. But I have learned how to properly invest from my guru using Options and Technical Analysis which bumps up my returns. It all starts with believing you can, then you just need to find a way to achieve it.)
What you should do is just play around with the calculator using all the different elements offered. Have fun. Go nuts, and try and find that sweet spot for yourself. Maybe you need to save a little bit more each month, or increase your return even a little bit.
Side note: You don’t need to enter your email to see the results, unless you want to save them. This calculator will always be here if you want to check on your progress in the future.
Inflation
The inflation metric on this calculator seems to be broken, so I’d just ignore that for now. If you want a Rule of Thumb you can expect about a decease of roughly 50% in buying power over 20 years. In other words, $1,000,000 20 years from now will have the buying power that $500,000 has today. This is another excellent reason to start Investing today.
Here’s the calculator, Have fun, and ask any questions you may have in the comments section below (or by clicking the little mail icon on the right).
PS.
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