Becoming a millionaire can often seem like something that's out of reach for most of us, but financial adviser David Bach, author of the book Smart Couples Finish Rich, says all it really takes is a little planning.
You see, little savings here and there can really add up over time. If you start saving $2/day when you're 20, or $20.55 when you're 40, you can end up with a million dollars in your bank account by the time you're 65.
The key to getting rich, says Bach, is to stick to a savings and investment plan as early in life as possible. So, how does $2 a day turn you into a millionaire? Bach created the chart to lay out how those savings accumulate over time.
The chart assumes that you have no money invested, and assumes a somewhat aggressive 12 percent return. While that might be just a tad bit generous, it still shows how a few dollars a day turn into millions. Accumulating wealth isn't just about saving money, it's about investing it wisely so it multiplies. The authors of the extremely popular The Millionaire Next Door: The Surprising Secrets of America's Wealthy say that, on average, millionaires invest 20 percent of their income and usually live well below their means.
Robert T. Kiyosaki, author of Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money That The Poor And Middle Class Do Not! (which bills itself as the #1 Personal Finance book of all time and has sold 27 million copies worldwide), agrees with that advice. He says earning large sums of money doesn't equate wealth. It's the amount that you keep and what you do with it that matters.
Whether you've just started saving money or you want to increase your investments, the process can often be confusing. Don't give up, however. Financial planning takes time, but it's worth it. An article from GetRichSlowly sums this up nicely:
Prodigious accumulators of wealth spend nearly twice as many hours per month planning their investments as under accumulators of wealth… You don’t have to earn a big six-figure salary for planning to pay off. In a survey of 854 middle-income workers, Danko and Stanley found ‘a strong positive correlation’ between investment planning and wealth accumulation.
Consulting with a trusted financial planner to help you plan your investments and point you in the right direction. If you're still unsure about how much you need to save, try this helpful savings calculator. Basically, the next time you're craving that fancy coffee, think about putting that spare change into a savings account instead. It'll definitely pay off in the long run.
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