How To Save Your Way To A Millionaire
Saving your way to becoming a millionaire is an elusive goal for most people. What they do not know is that hitting your first million is completely doable. There are plenty of tips out there that you can consider, particularly those coming from self-made millionaires. However, you have to be extra careful when you meet unscrupulous people who will take advantage of your goals. Here are five tips on how you can save money and achieve your first seven-digit savings.
How to Become A Millionaire
Know how the numbers work
This is the most important tip that you need to note before kick-starting your way to your first million. If you save a dollar a day, then it will take you one million days to reach one million (of course!). This is equivalent to 143,000 weeks or exactly 2,738 years. Hitting your millionaire goal involves making serious considerations on how much you can save, and what investments will help you speed up the process – the goal here is to avoid it taking 143,000 weeks 🙂
Invest in windfalls
A windfall can boost your financial situation. Here are a few critical points to note:
- Invest in your education: Investing in education will provide you with more knowledge on many things. It also helps to get higher-paying jobs, and allow you to make better decisions.
- Avoid scams: You will often see warnings about scams in the news, but people are still falling for them and losing a great deal of money. If you do not understand it, then do not go for it. If it is too good to be true, then it probably is.
- A penny saved is a penny earned: By saving more money, you will become less dependent on investment earnings.
- Do not put all your eggs in one basket: You will see this tip in nearly every investment book or seminar… Diversify your investments into various asset sectors to reduce your overall risk.
- Be cautious with debt: Debt is repaid with interest. Many people get themselves into trouble because of debts. There are many types to watch out: mortgages, loans, credit cards, and more. Make sure that you can afford to pay off the debt, and minimize your risks of carrying it by applying for insurance.
Be careful when making high-earning investments
High-earning investments typically mean you will take greater risks. There have been cases when these investments collapse after a few months or years. The longer the time you have without needing access to savings, the more risk you can take with shares, property, and other assets.
One million might seem elusive, but its real value is reduced when you have taken inflation into account. This large sum of money will be equivalent to about $744,094 in ten years if the inflation rate is three percent.
Learn to love compound interest
Compound interest is about interest on interest. For example, when you start with $1000 and earn 10 percent interest, then your new total will be $1100. You can now invest this new amount and earn another 10 percent. The cycle keeps repeating, until it forms a snowballing effect. Did you know that $10,000 compounding at a 10% rate of return over 20 years will see you end up with a total of $67,275? Nice huh?