What it takes to have One Million net worth
Amassing one million net worth can be a matter of mathematics. It’s well known that investing in the stock market for many years, reinvesting your dividends, and letting that money grow and compound can make you a millionaire. Eventually, your investments will throw off more money than you save each year. And one day it will throw off more than your entire salary for the year. That’s when you reached FIRE.
For example, if you invest $500 per month in a diversified stock market index fund, and earn an average 7% return, you will be a millionaire in 36 years. Or, another example, $500 per month compounded at 10% a year, you’ll have over a million dollars in less than 30 years.
If you invest in a lower-return investments, such as money market or guaranteed investment certificates (GIC), you will have to save thousands of dollars more to compensate for lower annual return. The Rule Of 72 at 1% it will take 72 years to double your money.
Your income plays a role, but the way you save and invest is more important. Wealth is what you accumulate, not what you earn. And it certainly can’t be measured by what you spend. Wealth is not the same thing as income. If you earn a lot of money and blow it every year, you’re not rich. You’re pretending to be rich.
Ideally, your net worth will continue to grow as you age – as you pay down debt, build equity in your home, and acquire more assets. I do not use our house/cars/RV etc. in any of our retirement planning. But I do count it in our net worth. (net worth=all assets minus any liabilities.) Building a net worth of $1 million might not seem attainable, but it can be with hard work and patience. You don’t need a winning lottery ticket or a trust fund. You need to save as much as you can, for as long as you can, starting as early as you can. Making your first million will often take longer than making your second.
Don’t wait for retirement to enjoy life !!