How to become a millionaire without winning the lottery or starting a business

I used to think that the only way to become a millionaire was by either winning the lottery or starting a successful business. And while I had dreams of becoming one, it felt more like a pipe dream. I’m not alone in thinking this way–many of my friends and family share the same sentiment. I had one reader, someone I knew from years ago, email me a while back and tell me that he doubted he would ever become a millionaire. Why is that? Well, if you grew up not knowing anyone who was a millionaire, you would be highly skeptical that it’s possible to become one. Even if someone showed you the evidence and math behind it, you still wouldn’t believe that YOU can become a millionaire. It has to do with reference points and our reference experiences in life. If all you’ve ever been exposed to were people who were not millionaires, that’s what you are accustom to. 

When I was doing my training to become a Certified Financial Education Instructor, one of the presenters gave an example that really stuck with me.

16, 17, and 18 year olds students at a financial literacy event that took place a few years ago were asked, “If you begin saving $100 and investing it right now, each and every month, can you become a millionaire by the time you reach retirement age?”*

This topic was covered at the beginning of the event, at the end of the event, and several times during the event.

Data from pre- and post-tests showed no significant improvement in this particular topic, which was covered over five times.

During the event, the students were shown charts and demonstrations on compound interest. There was even a chart in their handouts that showed them how $100 saved every month could grow to a million dollars by the time they reached retirement age. This topic was actually covered more times than any other topic, yet this question on the pre- and post-tests received the lowest number of correct answers out of all the questions asked. Any guesses why?

The students at this event were Simon Scholars who received scholarships from the Simon Family Foundation. The Simon Family Foundation serves the underserved population and help young people facing adversity go to college. A lot of these students came from challenging upbringings and as you may have guessed, had a very different set of experiences. What it really came down to was this: these students simply did not believe that it could actually happen to them.

For some of you reading this, it’s really hard to imagine that you can become a millionaire in your lifetime. You might never have known anyone who has done it, so you don’t think it’s possible. Even when presented with the math, you’ll doubt the power of compound interest. But let me tell you, if you change your belief system and start saving today, it can have a powerful impact on your future. The earlier you start, the more likely you will become a millionaire.

How much you need to save each day to become a millionaire by age 65 (assuming 8% annual return, compounded annually)

Starting ageBiweekly savingsMonthly savingsYearly savings
20$100$216$2,592
22$117$253$3,036
25$149$322$3,864
30$224$484$5,808
35$340$736$8,832
40$527$1,140$13,680
45$841$1,822$21,864
50$1,422$3,079$36,948
55$2,656$5,753$69,036

If you got a job right out of college (at 22) and invested just $117 every two weeks or $253 every month in a globally diversified mix of low-cost index funds, you’ll become a millionaire by 65. That’s it. That’s the secret to becoming a millionaire.

The Late Penalty

The problem is, most people don’t think about retirement until they are in their 30s or later. If you don’t start investing until you’re 30, you’ll have to save twice as much per biweekly paycheck to end up with a million dollars by 65. The longer you wait, the steeper the climb. And the amount that you need to save doesn’t just increase slightly, it increases exponentially. Who has $1,422 to invest every two weeks at the age of 50 when their kids are about to start college? You’ll also have to contribute more over your lifetime to end up with a million. Compound interest likes to punish those who are late.

So if you’re doubting that you can become a millionaire, I’d like to know why in the comments below. What are some things that are preventing you from saving?

*This question assumed a 12% return which was what the stock market had historically returned, however, experts forecast that the rate of return will be lower for the future, which is why I’ve used 8% for my numbers.

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