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There is a popular misconception in the business & financial world.. Many people believe that you need to make a lot of money to begin investing. However, this couldn’t be further from the truth. First and foremost, you can decide to invest a small amount, every single day, no matter how insignificant it may seem to you at that point of time. Second, if we wait until we make a small fortune to begin investing, most of us would be waiting a long time and would probably never even start. But more importantly, you don’t need to wait until you earn a super high income to start investing – that is the magic of investing!
With this idea in mind, it’s time to get started with some valuable investment tips on “How to become a millionaire” so you can take the first but vital step towards sorting your finances for life. Learn how to build wealth no matter how much money you make. Plus, discover 2 simple habit changes that can help make you a millionaire. Everything you need to know about investing – why, when, what, where, and how to get started – you’ll find right here.
Investing is a concept that the majority of people avoid because they think it sounds confusing. But we’re going to help you understand how it works, even if you don’t know the first thing about it.
Investing is fun once you get the hang of it! Here are a few of the things you’ll learn in this article:
- How to become a millonaire with 2 simple lifestyle changes that can make you a millionaire
- What compound interest is
- The difference between active and passive investing
- What stock market investing and real estate investing is
We also explore ideas like, “how to become a millionaire with no money or rather with an extremely small daily contribution.”. Read on!
School didn’t teach us how to manage and invest money for today’s economy. In fact, most schools are still teaching old-fashioned money management (if they teach anything at all). That’s why we have almost an entire generation of people graduating without a clue on how to handle their money in today’s economy.
Lack of financial education might also be why 78% of working Americans are broke.
Our parents’ and grandparents’ money rules stopped working as the economy began to change with the digital revolution.
That might also be why most people currently approaching retirement age have no money set aside to retire on. The Baby Boomer generation got caught between the old and new economy, leaving many without enough retirement funds to cover basic needs like housing and medical care.
In this article, we’ll help you understand how to become a millionaire by the time you’re 65. We’ll answer the following popular questions about investing:
- Should I Save or Invest My Money?
- How Old Should I Be to Start Investing?
- How Much Money Should I Earn Before I Begin Investing?
- What is Investing?
- What Kinds of Investments Should I Buy?
- How Can I Get Started Investing?
No matter how old you are or how much money you make, you must learn basic investing concepts today if you want to survive tomorrow’s changing economy.
1. Should I Save Or Invest My Money?
Many of us grew up thinking that investing is for rich people who have extra money to play with. But we would like to emphasize once again that nothing could be further from the truth.
The old-school way was to work hard and save money throughout your lifetime. But in our new economy, saving money is a losing proposition – thanks to the rate of inflation.
Also, the cost of living is becoming so expensive that many people will end up in 1 of 2 categories by the time they’re 50: Rich or poor.
To further complicate things, you only have 24 hours in a day where you can physically work for money. So your paycheck is limited to the amount you’re able to earn in those limited hours.
That’s why you need to get your money to earn money for you. And that’s where investing comes in.
Investing isn’t just for “rich” people anymore. It’s for everyone, and in fact it’s how you can become a millionaire.
Investing is even more important for people who don’t earn a lot of money. In fact, it may be the only way (without starting a business) for many working-class people to build the wealth and security they need to survive and retire in the future.
So, yes. You should invest. If you’re thinking how to become a millionaire, it’s done through investing. Everyone should invest. It’s no longer an activity for rich people or something for you to “get around to someday.”
In today’s world, investing money is as important as saving money was back in the 50’s.
Investing is the new saving. And if you don’t have the money to invest right away, start saving to invest, no matter how small the amount.
2. How Old Should I Be To Start Investing?
Are you one of those who tend to procrastinate when it comes to investing? Then it’d be good to remember that with each day that you lose, you’re losing not only the probable interest but also the interest on interest – you may have heard of a popular investment concept called compounding – you could have gained otherwise by investing sooner.
How to become a millionaire? Start investing as early as possible; it’s as simple as that but very few people follow this.
You should begin investing by the age of 18, because you can potentially earn 80% more from your money if you start investing early than if you start in your early 40’s.
If you can start investing before the age of 18, that’s even better. This will give you an added advantage because your money will have even more time to grow. But owing to the lack of financial education pertaining to investments in schools, many young adults grow up without any investment wisdom. Moreover, they tend to breeze through their teens, twenties, and sometimes even thirties, thinking that the time to save is later. Many don’t start investing until later in life, making it extremely difficult to reach their financial goals.
However, it’s prudent to begin investing money when you’re young, because the amount of wealth you build depends on how many years you allow your investments to grow. Come to think of it, it’s one strategy that can help increase your chances of becoming a millionaire. For example:
Nancy begins saving and investing her money at the age of 18 and here’s what happens.
Nancy begins investing 10 dollars a day at the age of 18. By the time she’s 40, she’s put aside about $80,000 into investment seeds. Great!
At 40, Nancy stops investing her money and begins spending her earnings on a bigger home, fancy cars, and lavish vacations.
But, she doesn’t touch her investment funds. She lets that money grow and compound meaning she continues to reinvest those profits until she retires.
At the age of 65, Nancy retires a millionaire.
Not only did she never invest another dime past the age of 40, but her investments actually earned a bit less than average (she got a 7% annual return on her money, which is less than historical average stock market or real estate returns).
Yet, by the age of 65, her $80,000 investment has grown into over $1,000,000.
George waits until he’s 40 to begin investing. Here’s what happens.
George invests the same monthly amount as Nancy ($10/day or ~$300/month with 7% annual return), but he doesn’t begin investing until he’s 40 years old. By the time he’s 65, he’s invested $90,000 (compared to Nancy’s $80,000 ).
At the age of 65, George’s investment has only grown to $246,198 and he will not be able to retire the way he hoped.
In fact, even if George had doubled his monthly investment to $600 and gotten a higher rate of return (10% vs. Nancy’s 7%) the resulting $812,146 would still be lower than Nancy’s million dollar retirement fund.
What if you invest more or get a better rate of return?
- If Nancy got a 10% rate of return instead of 7%, she’d have roughly $3,500,000 by the age of 65.
- If she invested $600 a month AND got a 10% rate of return, she’d have over $5,000,000
- If she invested $600 a month, got a 10% rate of return, AND continued investing until the age of 65, Nancy would retire with 8 million dollars in investment funds.
The chart below shows some of the variations on different ways that Nancy and George might invest over time, along with the amount they’ll earn* when they retire at age 65.
|Monthly Investment||Rate of Return||Age When Investing||Total $ Invested||Amount
Earned by Age 65*
*Values will vary slightly based on how often the investment is compounded.
Time is one of the most important factors in growing wealth.Become a millionaire by investing what you can today. Even if you’re young, you must begin investing immediately. In fact, it’s the right time to begin. Invest $10 and earn daily so you can not only take care of your expenses but also generate enough income to continue investing every. single. day.
If you’re older, though, don’t lose heart. The best time to start was yesterday. The next best time is now. You’re never too old to build wealth. Ray Kroc was almost 60 years old when he bought McDonald’s. You might have to work a little harder and invest more aggressively, but it’s never too late to start!
3. How Much Money Should I Earn Before I Begin Investing?
You should begin investing a portion of your paycheck no matter how much money you earn.
It’s a myth that the size of your paycheck determines your financial well-being and wealth. We all grew up believing this, but it’s just not true.
In today’s world, everyone younger than 65 should be investing money.
Even if you’re earning minimum wage, you can still set aside a portion of your paycheck for investing.
Are you living paycheck to paycheck and wondering how to find the money to begin investing? Start by taking a good look at the way you live.
How to Become a Millionaire with 2 Simple Habit Changes
The majority of people burn through their earnings as if expensive coffee and cable TV were a necessity. Let’s take a look at where that’s left them:
- One-third of Americans have no retirement savings and 56% have less than $10,000.
- Almost 40% have no savings at all, and another 57% percent have less than $1,000 saved.
- The average household owes $15,270 in credit card debt alone.
Here’s where it gets even crazier.
This is one of the reasons why the majority of people end up broke.
This is also why approaching life differently from the majority mindset is so important. Thinking like the minority means you think for yourself instead of blindly following the crowd.
An opportunist looks at the numbers above and says:
““Hmm, if I eat at home ($250/month savings) and don’t waste food ($44/month savings), then I can save almost $300 a month and become a millionaire – by simply making these 2 small habit changes.”
In order to build wealth and financial security, you must live differently than the majority of your friends and colleagues. This doesn’t mean you can’t enjoy life. It just means that you make the decision not to waste money, and you make the sacrifices needed to live below your means.
So, how do you build wealth by investing? No matter how much money you make, there are only 2 things you need to invest and grow your money:
- Delayed gratification
Success comes from determination, discipline, and your ability to control impulsive spending. Develop patience when you’re young. Buy things that pay YOU for owning them – like investment seeds. Don’t get caught up in money-wasting, even if your friends are doing.
For example, Earl Crawley is a parking lot attendant that never made more than $12 an hour throughout his lifetime.
By living frugally and investing a little at a time, he built a net worth of $500,000 over the course of 44 years.
Ronald Read was a janitor and gas station attendant who quietly built an $8 million fortune by investing throughout his life. According to a CNBC report (image below) nobody, not even his family, knew how much wealth he built until after his death.
So, if you’re wondering “how to become a millionaire”, it’s simple: Don’t wait until you’re making more money or until you’re older to begin investing. The time to get started is now.
You can begin building wealth no matter how old you are or how much money you earn. Start with whatever you can, live below your means, and let your money grow.
4. What Is Investing?
Investing is when you put your money in a place where it’s going to earn more money.
When you take the profits from what your money earns and reinvest it, then your money’s money earns more money.
This is called compound interest investing, and it’s an important concept to understand when investing.
When your money’s money’s money earns money, then you’re compounding like crazy and your money begins to snowball.
Are you with me so far?
Compound interest is like a snowball rolling down a hill. It starts out small and grows bigger and bigger as it continues to roll. The longer it rolls, the bigger it grows.
When you keep reinvesting the money you make, your money compounds and, over time, grows at bigger rates.
5. What Kind Of Investments Should I Buy?
Let’s learn a few simple terms that will help you better understand investments. For starters, there are two types of investments: active and passive.
Active investing is when you physically run your investment (like running a business).
Running your own business is an active investment because you are investing your money and your time. If you want your business to grow, you will have to put the work in to make the business grow (at least initially). So if you invest $100 in your business, you will be physically working to make sure your $100 grows. That’s why you typically get a better return with an active business than a passive business. But you should also be investing in passive businesses so you can benefit from the freedom that comes with it.
Passive investing is when you don’t have to actively run the investment – your money earns more money, even when you’re sleeping (like the stock market or real estate).
You put in the work in the beginning finding the right investment and then the investment will continue to pay you whether or not you work. Stock market investing (with dividends) and real estate investing are some of the most popular passive investments.
What Are Stocks?
Stocks are small pieces of ownership in a business.
For example, let’s say you buy one stock in McDonald’s. Congratulations! You just became one of the owners of McDonald’s.
You won’t be able to tell McDonald’s what to do, but you do get to share in their profits. So, if the company earns a lot of money next year and their stock price goes up, you could sell your shares of McDonald’s for a profit
Stocks also earn you cash through dividends. Dividends are earnings that you receive, usually quarterly – meaning every three months, just for owning the stocks. Not all companies pay dividends.
To take advantage of compounding interest on your McDonald’s stock, when you get your quarterly dividend, the dividend should automatically be reinvested to buy you more shares of McDonald’s so your money’s money makes you more money. This way, you’ll own more shares so you’ll get more dividends next quarter which can be used to buy you even more shares!
Hopefully you’re starting to see how the snowball works and how to become a millionaire by leveraging this principle.
What Is Real Estate Investing?
Real estate investing is our preferred investment option.
Real estate investing is a way to make passive income from properties that you own. When you buy real estate as an investment (as opposed to a place for yourself to live), you buy property for someone else (tenants) to use in exchange for rent.
Every month, tenants will pay you rent to live in or use your property giving you cash flow. In addition to cash flow, real estate investing also offers some of the most favorable tax benefits.
But that’s not all, if the value of your property goes up, which is called appreciation, you will profit from the sale as well.
You can never predict how much money you will make when you sell an investment seed. However, you can fairly accurately calculate and predict your income when you invest in dividend paying stocks and income producing real estate.
6. How Can I Get Started Investing?
Getting started investing your money is simple.
- Set aside a portion of your income and invest that money into investment seeds.
- Learn more about investing to find the best ways to invest.*
- Continue learning in order to earn a higher rate of return.
Learn everything you need to know to start investing – download our investing eBook for free when you sign up for our money and finance newsletter.
If you start young and invest in the right places, you can potentially become a millionaire on as little as $10 a day. Don’t put off investing until you’re older or earning more money. Also don’t succumb to “get rich quick” schemes that typically prey on people who’re exploring ways of “how to become a millionaire in 5 years or sooner.” Instead, be patient, do your research to pick the right investment vehicle, and allow time for your money to grow. Above all, start now so you can build wealth over time and enjoy your retirement someday.
The Importance of Time and Long-Term Investing
As the saying goes, time in the market beats timing the market. After all, you can’t expect to always know what’s going to happen in the future — even trying to time one trade could leave you on the wrong end of history. Sure, it’s easy to look back and say, if you invested here or if you got out here, you’d be a millionaire. But hindsight is 20/20, and it’s hard to get it right when talking about the unknown.
Instead of focusing on shortcuts and other quick wins that will usually leave you chasing trends long after the big move has already happened, you can actually invest $10 and earn daily wins when you’re in the market over a long period of time. One $10 investment won’t make you rich, but investing $10 a day over the course of months, years and decades will. It’s all about putting your money in the market and staying in.
The Problem of Short-Term Wins
For most investors, making a little bit of money in the stock market is an enticing thing. But if you invest $10 a day, you could have thousands in your account by the end of the year. If your stocks do well, you could also have an extra few hundred in profit by year’s end. Whatever you do, resist the urge to cash out.
A nice vacation, a shopping spree or some new toys for the garage, backyard or entertainment room are all great to have, but as far as investing goes, you’re just getting started. If, instead of cashing out, you let it ride and invest your profits, dividends and spare money back into the market, you’ll be compounding your success.
Investing $10 for the short haul and earning a bit daily on that amount isn’t enough. It’s also not ideal to take your profits to spend if you hope to be a millionaire by 40, or at all during your years of earning. Only through constant investment and staying in the market will you truly be able to create that snowball of wealth that builds up its own inertia and puts you in a position to become financially independent.
Boring Stocks Can Be Profitable
While many investors chase the hottest stocks of the day, you don’t have to put your money into new companies that may not be around for the long haul. Keep in mind that any investment can go to zero if the company collapses and the stocks are deemed worthless.
Just look at Enron. Enron stock used to be worth close to $100 a share in mid-2000 — a good investment for just about anyone. But by November of the following year, the stock was worth less than $1, a 99 percent decrease in value.
Instead of investing in verticals you may not understand, you can’t really go wrong with investing $10 and earning a bit daily on stocks such as Hershey, Coca-Cola, Johnson & Johnson and McDonald’s. These long-standing companies have been around for decades, and they’ll be around for more decades yet.
They might not be the sexiest stocks, but boring stocks are often always profitable, so don’t discount the value of going with a sure bet over something that may be a bit more iffy. It’s what people do when they’re looking to become a millionaire quickly.
In fact, Warren Buffet, the Oracle of Omaha himself and an investor that has made billions in the market, suggests investing only in companies that you know and understand. Don’t invest in a stock because you think it’s going to go up; instead invest in companies that will offer long-term value.
Hopefully our guide on “How to become a millionaire by investing as little as $10 a day” will help you make the right investment decisions for your finances.
* Find out more about investment rates:
20 Years of Stock Market Returns, by Calendar Year, The Balance