10 Percent Can Make You Rich!
Do you think a person earning $20,000 per year can become a millionaire? Absolutely! Anyone can do anything they set their mind to it and if they develop a realistic plan and stick to it. Let’s take a look how.
John is a hard working man earning $20,000 per year in his job. He has learned to reduce the money he is spending on taxes, life and health insurance, health care, food, and cars. He has also learned the importance of planning for retirement and purchasing his own home. He is 35 years old, and has set a goal of having $1,000,000 when he retires at 65. What must he do?
First, by reducing many of his living costs, John has worked into his budget a 10% savings plan. This means he will be able to invest $2000 per year into a tax sheltered Retirement Account (which by the way, further reduces his taxes). He might even use a self-directed account, therefore even further controlling the investment vehicle. John knows he MUST earn a minimum of 15% a year on his investments. So, he may select tax liens in Florida (18% a year), stock investing (Dogs of the Dow-17% since 1973), or real estate investments, with rates of return (cash on cash) of 15%.
There are several ways to get 15% or greater on investments, as well as cash flow strategies. Bottom line he is going to get at least 15%! His investments gains an average of just 15% per year over the course of 30 years. How much do you think this has earned him?
$2,000/year x 15% return on investment (compounded) x 30 years = $739,066.
Well, John has not quite reached his goal yet. But remember, he is also investing in a new home. He knows that real estate will appreciate on average at 5% per year (national average). John finds a nice home that suits his taste at 10% below fair market value using the rules of this course for $80,000. The house is actually worth $88,000.
Starting value of $88,000 x 5% annual appreciation x 30 years = $393,161.
So, at age 65, John has $393,161 in equity + $739,066 in his mutual fund, which equals $1,132,227. You see, John has surpassed his goal.
A simple plan can work. The key is being disciplined and saving for your future. Your objective is to make available for savings, 10% of your income. If you cannot achieve this simply by reducing your expenses, you must increase your income.
SUPER CHARGE THE PLAN
Now if we want to supercharge this plan, we have to increase the amount of starting money, or more importantly, get a better rate of return.
For example, if we start with a small amount of money, granted “small” may differ for everyone, so I did a table with various amounts. Added 30 years, at some aggressive rates of return, and you have some unbelievable future wealth. Even Trillions!
30 Years of Investing at different ROI
Amount – 15 percent – 25 percent – 50 percent
$1,000 – $66,212 – $807,794 – $191,751,059
$5,000 – $331,059 – $4,038,968 – $958,755,296
$10,000 – $662,118 – $8,077,936 – $1,917,519,592
$25,000` – $1,655,294 – $20,194,839 – $4,793,776,480
Now the reality, is that we are not going to hit a TRILLION dollars, but it does illustrate the point. Strong rates of return over time, give you outstanding results over time.
My magic number is 15%! In fact one of my favorite trading systems is credit spreads. A high probability system, with outstanding returns. Often, you can earn 5-10 percent per month. No guarantees, investing has risk, but highly probable. You should check it out.