Getting Rich is Actually Easy

Getting Rich is Actually Easy
Getting Rich is Actually Easy

 

Yes, I said it. And it’s true. Getting Rich is easy.

It’s really just a matter of priorities.

Plus some simple math.

Someone once said that Stephen Coveys “7 Habits of Highly Effective People” was common sense that we needed to be reminded of. The same could be said about the simple concept of compounding interest.

Just Google or use this link to a “Compound Interest Calculator“, and play with the numbers. It’s fun actually.

For example, if you’re 20 years old, and you invest $200 a month with an 8.5% return until retirement, at 65 you would have about $1.2 million.

Or, say you’re 20 years old, you get a full time job netting $20,000 a year (call it $1500 a month). You suck up to your parents and live there until they have trouble remembering your name. In the meantime you save 90% of your income. At retirement you would have something like $9 million +. If your boss gave you an annual 2% pay raise to keep up with inflation and you save it too, make that about $11 million.

Now let say you’re not 20 anymore. Maybe you’re 40 years old. This is where minimalism really kicks in and helps.

Say you have a half decent two income family and you start cutting out the wasteful shopping, buying crap that gathers dust in your garage, you even give up cable TV. Ouch. I know. Seems drastic but it’s not. We gave up cable and kept Netflix and have more than enough great stuff to watch when we want to. We also got rid our landline phone.

Anyway, you cut back. No daily trips to Starbucks, simpler vacations, cut out the bottled water and get a Brita. Google “frugal” and you’ll see a million ways to cut back without suffering.

So now you start saving $1500 a month at 8.5% when you’re 40. At 65 you’ve got something around $1.5 million.

It’s really just a matter of priorities, and patience. Trying to get rich quick; now that’s hard and risky.

Do you want a Starbucks everyday or an extra $1.5 million for retirement? Just sayin’.

Getting Rich is Actually Easy – Part 2


Related posts you can enjoy…

How a Regular Savings Habit Made T. Johnson $70 million

Understanding Investing for Wealth Is Easy: Part 1

Understanding Investing for Wealth Is Easy: Part 2

GRATITUDE LIST

This is where I says thanks to people who have helped me in one way or another with my site. Today I want to thank a couple of fellow bloggers who’ve provided some great insight to blog building. Check them out.

http://moz.com/

http://marcguberti.com/

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10 comments:

    1. Hi, Yes you are right. An interest rate of 8.5 would be hard to get. What we are wanting is a “return” of 8.5%. For example you might get a dividend of 4.5% and a capital gain of 4% for a total of 8.5%. If you’re not familiar with these terms don’t worry, it’s not that complicated and I will get to it in future posts. Thanks for taking the time post your question. If you don’t ask, you don’t find out.
      Archie

        1. Hi Matt,
          Thanks for taking the time to ask your question. I have followed up with two additional posts to explain in greater detail how I aim to get better returns. They are:
          http://www.dirtyredhat.com/understanding-investing-for-wealth-is-easy-part-1/
          http://www.dirtyredhat.com/understanding-investing-for-wealth-is-easy-part-2/
          I hope this helps you. Let me know.
          Also, here is a link to historical returns in the stock market:
          http://observationsandnotes.blogspot.ca/2009/03/average-annual-stock-market-return.html?m=1
          Thanks again, and all the best!

          1. My knowledge of ETFs is limited. My general knowledge of them tells me that they are probably a better best then most of the funds out there, and certainly have become popular. I can also see it might be easier for some people who really don’t want to, or aren’t comfortable buying their own stocks. I can only, of course say what works for me. With my scenario I believe I still have the potential for a strong upside while minimizing my downside risk. For, example, I once was able to buy DD in a down market and did well when there was a positive correction. This might have been diluted in a larger pool. Maybe there’s such a thing as over-diversificaton…hmmm. I personally like to be in direct control as much as possible, and I can easily sell on a moments notice, as I did recently when I decided it was time to go to cash. I didn’t need to contact anyone; I just did it. Again, this is what works for me, and I wanted to share it. Naturally, each of us must take personal responsibility and do what works for ourselves. Mostly though I wanted to demonstrate to some people that it really is possible to get an 8.5% return. Here is an interesting link to historical market returns: http://observationsandnotes.blogspot.ca/2009/03/average-annual-stock-market-return.html?m=1
            Thanks again for the great question Matt! I may have to do some homework now.
            Archie

  1. I think what you mean to say is that getting rich is simple, which is different from easy. Living the way you describe may not take any complex planning, but many people would find it hard.

    1. Yes cf, I think that you’ve hit the nail on the head. I don’t know if you’ve read many of my posts, and, of course, there is still a lot to come, but you’re right; many people would find it hard. The whole jist of my philosophy is that they shouldn’t have to. Our priorities are wrong. It’s a complex subject but if you happen to follow my posts, over time, I think you will begin to see how it can and should be easy. Thanks very much for the feedback!
      Archie

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