Just double $1000 ten times!
There are over 6 billion people on Earth.
John D. Rockefeller became the world’s first official billionaire in 1916 as a result of his ownership of Standard Oil. Just over a century later, there are now 2,043 billionaires in the world as of 2017 according to Forbes Magazine. This means the odds of the average person becoming a billionaire are quite slim, almost non-existent.
However, according to a 2016 report by global consultancy firm Capgemini there are around 16.5 million millionaires in the world! A million is one thousandth of a billion, but it’s still a large number and you’ve got a far greater chance of joining the exclusive ‘7 Figure Club’ especially if you are fortunate enough to live in the USA, the Land of Opportunity and home to 10.8 million millionaires.
The current population of the United States of America is 325,316,130 as of Tuesday, November 14, 2017, based on the latest United Nations estimates. With that in perspective the odds of a US citizen becoming a millionaire are roughly 1 in 325. So what’s stopping you?
“The longer you wait to do something you should do now, the greater the odds that you will never actually do it.” — John C. Maxwell
A few blogs ago, I covered the Rule of 72 and the miracle of compound interest.
If you take $1000 and double it ten times you end up with $1,024,000!
Initially the compounding effect barely registers on the above graph, only to skyrocket at the sixth doubling.
Putting off retirement saving until your 30’s or 40’s practically destroys your potential retirement nest egg!
Dave Ramsey, Tony Robbins and just about every wealth adviser worth their salt will tell you that the S&P 500 has yielded a historical average of over 10.5%. Low-cost index mutual funds allow the average investor to capture those same rates of return. (All 401k plans offer mutual funds in their investment portfolios and I’ll discuss this more in detail in a later blog.)
Coincidentally, (or not) both Dave Ramsey and Tony Robbins each have a chart in their books showing the effects of compound interest on the life savings of two friends. I’ve even seen several other versions online. The names, ages, and savings amounts are different , but the end results are the same. The person who started saving for retirement earlier always invests significantly less money, yet beats the friend who starts later and invests much more. The first time I saw this it blew my mind, but it illustrates the importance of saving for retirement early in life. According to almost every financial expert I’ve consulted, you’re going to need a minimum $1,000,000 to retire comfortably. It is possible for ANYONE to attain this goal provided they begin investing at the earliest possible age.
Dave Ramsey has his version of the aforementioned chart in his book Financial Peace on page 120. The Tony Robbins version appears on page 24 of his book Unshakeable. I’m going to use Robbins’s version, because it has a larger annual investment. The assumption is $3600 invested per year, with 10% interest. Basically, Joe and Bob are both the same age . Joe begins investing $300 in the stock market every month from age 19 to 27, saving a total of $28,000 and then he decided to quit saving altogether and let it sit and collect interest. Bob doesn’t even start saving until he’s 27 but keeps investing every year until he’s 65, for a total of $140,000. When they both retire at 65, Joe has $1,863,287 and Bob has $1,589,733. Because Joe started earlier, he invested $112,000 less, yet he earned $273,554 more than Bob! This is because of the power of compound interest.
In 2018, the maximum annual 401k contribution allowed will be $18,500. Imagine being a 16 year-old teen living at home and being able to invest that amount annually for 5 years. You could have over a million before you were 45! So what are you waiting for? Go and take steps to establish your retirement nest egg today, because you’re not getting any younger! As always I wish you happiness and success!
One thought on “Who wants to be a millionaire?”
Great quote from John C Maxwell. I’m also on a journey to Financial Freedom. Check it out here http://www.slimfitwallet.blog.