Think of all the people you know. Look around you. How many people do you see or know wouldn’t want to be a millionaire?
Okay, so there are some idealistic types who say, “money isn’t everything”. It doesn’t have to be, though, does it? Still, I’m pretty sure if I put a cool mill in their hands, they’d change their tune.
Some of you may already be able to call yourselves ‘millionaires’, though many, if not most, of you are probably not able to do so.
If you ask the team at Motley Fool – aside from not having enough disposable income, an adequate amount of time, or an aversion to taking risks – they’ll tell you there were only three things that stopped you from becoming a millionaire.
Read more: Seven money secrets of the rich
And the good news for some of you is, it may not be too late to address these ‘mistakes’ and set a wealth-amassing plan in motion.
But you do need to have a plan.
At least that’s the first thing stopping you from amassing a fortune.
To become a millionaire, you need to set the goal of accumulating $1 million, then evaluate where you are now and make a roadmap for how you will reach your goal.
How much you will save or invest each year? What’s the rate of return you will receive? How long you will need to save or invest at that rate? These are the obvious questions to which you’ll need answers.
For example, if you’re 50, plan on saving for 30 years and can invest $5000 each year, you will need a rate of return on average of 10.72 per cent each year.
If you invest more each year, you could reach your goal sooner with a more conservative rate of return.
Investing $7000 a year for 27 years will mean you reach $1 million at the aforementioned rate of return. If you invested $7500 annually, an 8.5 per cent average return would do the job in the same time.
The second thing stopping you from making a million dollars is a lack of consistency.
Consistency is key. While you may not be able to control market conditions, you can control how consistently you stay invested. Missing just one good year of stock market performance could set you back years from your goal.
According to Motley Fool writer Diane Mtetwa: “If instead of beginning in January 1991, you had invested in the S&P 500 from January 1992 until the end of December 2020, your average rate of return would’ve been 10.1 per cent because you would’ve missed a positive return of 31 per cent in 1991. And this difference in your average rate of return would’ve resulted in $125,000 less over 30 years.”
The ‘trick’ is being consistent with the amount you save and years of saving, she says.
“If you’d only saved for 25 years instead of 30, your investment would’ve grown by $400,000 less. And if you could’ve only invested $4000 a year for the 30 years you would’ve ended up with almost $200,000 less.”
The third factor stymying your millionaire aspirations is not tracking progress
Any investor will tell you that the market doesn’t always go the way you want it to, and there will always be ‘surprises’, both good and bad. You may also make a few decisions along the way you may wish you could take back.
If wishes were dollars we’d all be millionaires.
What you can do is to regularly track your progress along the way to help you course correct.
Read more: Noel Whittaker reveals his investing rules
If your original plan no longer looks like helping you achieve your goal, you can change it. Even small adjustments such as saving more or extending your deadline may help you get back on track.
Granted, these suggestions really only apply to those for whom everything else has gone right. Good income, long working life, some semblance of financial security and stability and few if any major ‘black hole’ events.
But even if you don’t make it to millionaire status, these investing habits can still help you grow your wealth considerably.
What are your top money, savings or investment tips? Why not share them with our members in the comments section below?
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without considering your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before deciding based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
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