I can tell you how to become a millionaire… A guaranteed method.
How is this possible? You may ask
One simple answer.
One simple thing that could truly change your life – but only if you let it!
Compound Interest
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”.
Albert Einstein
Okay, okay.
Anyone can provide a two-word answer and a quote found on the internet. I’ll provide you with the maths. You can even do your own research afterwards, and I trust that you will, but it all checks out – and none of these are impossible! In fact, most of them are incredibly conservative!
The Maths
Imagine you start investing at the age of 25…
Investment: Index Fund, S&P500 or FTSE100
Investment Period: 40 Years
Initial Investment: £0
Monthly Investment: £360 (£80 per week)
Interest Rate: 8%
Results…
£1,200,000
This sum of money would make just shy of £100,000 interest per year which is above 4x the average income.
This is incredible, and even if you can’t spare £80 a week. Any is better than none – trust me! Figure out what you could be able to put aside and input it into a compound interest calculator (I’ll link one below).
But let’s have a little look at an even better scenario!
Best Case:
Imagine you start investing at the age of 20, having saved up some money in your teens
Investment: Index Fund, S&P500 or FTSE100
Investment Period: 45 Years
Initial Investment: £2000
Monthly Investment: £200 (£50 per week)
Interest Rate: 11%
Results…
£2,600,000
This is an incredible demonstration of how compound interest can truly allow you to become a millionaire! And it’s entirely doable! These index funds have an historical interest rate of around 11%
Although these examples have, of course, been simplified to show truly how easy it is to become a millionaire, they are entirely possible. If you wish to do your own calculations you can google ‘Compound Interest Calculator’ or visit this site:
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Too Slow? Why you should do it anyway
Lets say you have lots of goals in life and want to be a millionaire and retired by the time that your 40. Things might not work out.
By doing this, your worst-case scenario is so much better than everyone else best case. Unlike so many people these days, you won’t be forced to work in your later years.
You can’t rely on the government/state to provide for you when you’re older. Equally, by doing this you won’t have to rely on famil and friends to look after you.
What about if things happen?
Life happens, and unforeseen circumstances get in the way of what we want in life.
And also sometimes once in a life opportunities arise.
Just because you’re saving your money in an index fund, that doesn’t mean that it’s locked off for the rest of your life. If you’re in the UK you have access to a Stocks and Share ISA which gives you a £20,000 allowance. These have incredible tax benefits.
But let’s say that you want to buy a house or something, you still have access to the money and any interest that it has accrued. This means that while most people don’t have money in case they need it, whereas you’ll have stocked piled a good amount of money.
You have the freedom to buy the house, you have the freedom to take a few years off work if your health fails. You’ll be in a far greater position than most other people will be.
What about if I get rich quicker?
Let’s say that you create a business that makes you a millionaire within a year. I’d say unlikely, but still possible!
You’d be able to increase the amount that you invest in the account. If you have £10 million in, then you’ll get £1 million in interest per year. In ten years you have £20 million. By that point, you’re making £2 million a year
Want to become a millionaire but still a teenager?
Keep some money in a bank account until you’re a little older
Let’s say you were able to work summers and save up £2000 by the time you’re 20. Invest that and add just £200 a month for 45 years (by the time you’re 65) with 11% interest you’ll have £2.6 million
The more you can invest and the early you can start the better. They say that getting your first £100,000 and equally the first £1 million is the hardest to get. By that time it just grows exponentially.
Want to read more about how to become a millionaire?
Read the rest from Learned Men: Wealth
I hope you’ve enjoyed this article and that it’s opened your mind to the powers of compound interest and how you CAN truly become a millionaire.
(I am not a financial advisor and you should do your own research before making any major financial decisions)
