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There’s a simple trick to becoming a millionaire if you are willing to be patient. It’s not sexy, but it works.
If you’re already a millionaire and want to hit the 8-figure mark, the same rule applies.
It’s called saving.
Let’s start with the saver who is yet to make a million dollars.
Let’s imagine someone in their 20s who has the unfortunate habit of buying Starbucks coffee daily and going out to lunch 2 times a week. At $3.65 a cup every day and a $10 lunch twice a week, the math looks like this:
$3.65 x 365 = $1,332
$10 x (52x2) = $1,040
Yes, that’s a cheap lunch.
Not accounting for any other bad spending habits, this person could have saved $2,370 last year by simply drinking free coffee at work and skipping lunch out (yes, I am aware that food at home is not free, this is just an illustration).
Before I show you the magic, I will give this person the benefit of the doubt and round down to $2,000. Let’s look at what $2,000 invested over a 40-year period can look like.
If you invest $2,000 into the market once and can manage a 7% return with compound interest for 40 years, you are looking at $30,000 by the age of 60. This is without ever contributing further.
Now let’s change one small detail. Imagine you decide to cut out Starbucks and extra lunches entirely and you contribute $2,000 more to your investment account each year. Instead of having $30,000 by the age of 60, you’re at $427,662. You are basically halfway to $1M by changing up a few habits and being smart with your money.
“But I’m already a millionaire and I can buy all the Venti Cappuccinos I want.”
- annoying coffee drinking millionaire.
This person is correct. When you hit a certain point of wealth, the small purchases don’t matter as much, but the principle is the same. Let’s say our second person has done well and became a millionaire at the age of 30. Instead of making payments on a luxury car, boat, and apartment, this person decides to put away $500,000 up front and contribute just $1,000 a month to their retirement. Compounded at 7% interest over 30 years to the same age of 60, this person will have just shy of $5M. $4,939,656.96 to be exact.
Add on an extra 10 years and they hit the 8 figure mark. Compounding interest is magic - the last 10 years out of 40 will double the stack.
Saving isn’t sexy, but it works.
I do want to point out that the whole reason behind investing and saving is to have a better quality of life. I would never advocate for someone to save every penny until death. That negates the purpose of saving in the first place. Money is meant to be both spent and saved. It’s all about balancing the two to be both rich in wealth and happiness.
Side note: people often ask “where can I get 7% consistently on my money?”
The S&P 500 index has returned a historic annualized average return of around 10.5% since its 1957 inception through 2021.
When you zoom out far enough, the stock market always goes up, and brief periods of poor performance are the exception and not the norm.
You can do even better in crypto.
In This Issue:
- Do This And Become A Millionaire
- Retail Is Buying BTC - IntoTheBlock
- Bitcoin Thoughts And Analysis
- Legacy Markets
- Trading Exercise - Can You Guess Up Or Down?
- Listen To This Now
- Crypto Mortgages Are Here
- Panama Legalizes Crypto
- My Recommended Platforms And Tools
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