Thomas Stanley Ph.D, and William Danko Ph.D. cover a number of characteristics common to America's millionaires. The book offers some excellent insight into the lifestyle of the typical American millionaire, and offers hope to the aspiring wealthy. As revealed by Stanley and Danko, most millionaires have achieved their wealth through disciplined savings, investing, and good old fashioned hard work.Through the magic of compounding returns, the average American is capable of becoming a millionaire, simply by investing money on a regular basis in the stock market. In Stocks for the Long Run : The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies
Jeremy Siegel, an economics professor at the Wharton School at The University of Pennsylvania proves that long term, stocks have offered the best returns and the greatest hedge against inflation of any financial asset and have averaged a 7 percent (inflation adjusted) real return on investment over the past 200 years.So how much must we invest in our portfolios to become millionaires?
It depends on your age, risk tolerance, and investment performance, but here's a great summary of how much you need to invest per month to save a million dollars by age 65 (if you haven't saved a dime).
- Age 25: $286 a month.
- Age 35: $671 a month.
- Age 45: $1,698 a month.
- Age 55: $5,466 a month.
At compounding returns we seek to help create a community of people with an interest in personal finance. We firmly believe that financial health and education are truly the only hedges that we have against the vagaries of the economy, the financial markets, or the job market. We will share our financial successes, and yes, even our failures, and together with our readers, move closer to financial independence for ourselves and our families.
Photo By: Will Clayton
I know there are people who have not put aside savings, but $5,466 per month for most people is impossible. You're are right, start early even if it is relatively small. Just $40 a week at 22 years old will become a million 40+ years later and you only need to do it the first 8 years. Ther eis the real benefit of time.
ReplyDeleteGreat lesson. I remember one of my teachers passing out an article similar to this when I was in college that really showed the power of compounding and how if we started saving at that age and kept the habit we would have no trouble reaching the million dollar mark. It really made an impression on me and I began saving as soon as I could once graduating and starting my career. I'm 30 right now and saving about double what the age 35 amount is so I have quite a bit of hope that I reach millionaire status before age 65 even. Just shows that it is possible even though lots of people believe it isn't.
ReplyDeleteTo most of us that were young once: where were we years ago? We all wanted to make the big bucks and to change the world. To all my old teachers and principals that surely knew how to use their old school authority: Where were you years ago? You have seen so many of us parading in front of your eyes and yet none of you told us all this...
ReplyDeleteTo my parents that told me so many times when I was a kid that I had to save my money: Here is the formula that explains it all once you input numbers: FV = PMT * ( ( (1 + i)n - 1) / i ) What a great family game and cerebral exercise that opens young eyes...
Thanks for the numbers. It shows with great clarity the power of compounding. Only, most people tend to forget that compounding needs time. Also, for younger people, what is important is often not the amount that is saved but the habit of saving regularly. Once the habit is there, it's easy to increase the amount.
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