One of my favorite books is The Millionaire Next Door because it focuses on how almost anyone can become a millionaire as long as they are diligent about saving, and more importantly investing. I see daily proof of this as people from all walks of life come into my office who have accumulated millions of dollars.
Other than starting the next Facebook, there’s no great secret when it comes to becoming a millionaire. It’s simply a matter of following through with a systematic savings and investment plan.
I recently read an article on Business Insider that featured a chart from the author of Smart Couples Finish Rich which broke down how much you would need to save daily, monthly and yearly to reach $1 million by age 65 depending on the age you begin saving.
This chart assumes the saver is starting with zero dollars and that they’ll receive a 12% annual return. I believe that’s a lofty rate of return to bank on, however it’s not impossible.
If you were to invest $1 in 1926 completely in the U.S. Ibbotson® Small Company Stock Index, you would have an average annual return of 12.2%. Data provided from the NYU Stern School of business shows a long term average for Large Cap stocks above 11%. This chart also doesn’t take into account the impact of taxes. Of course this chart can’t replicate itself perfectly into the future, but it’s an invaluable guide if you’re looking to attain your first million.
I’ve said before that it’s always best to start investing as early as possible since you’ll then have longer to leverage the power of compounding, but if you’re starting later don’t let that stop you. In my latest book, You Can Retire Sooner Than You Think, I wrote about a couple who only started really saving when they were almost 50. In roughly 16 years they were able to go from $32,000 to over $1 million in savings. Starting to save earlier certainly makes reaching $1 million easier, but don’t let you own procrastination derail you for good. Starting late is better than starting never.
The reason I’m sharing this chart with you is to remind you about the power of making small changes to your financial habits, and how they can impact you in a big way further down the road. If you’re looking to get started, I suggest you head over to YourWela.com to chat with an advisor or to try out the free financial tools. It’s never too early or too late to get started on your first million.
Certified financial planner Wes Moss offers financial and accessible investment advice to Atlanta Bargain Hunter readers.