Why I’m Going To Be A Millionaire And How You Can Be One Too
Read it and weep boys you read it right. I’m in the military AND I’m going to be a millionaire. One of the top 6% of the wealthiest people in the country. And I’m going to do it all without having to lift a finger. I’m actually not going to devote more than a couple minutes thought to it every year. No, I didn’t win the lottery, and no, Great Aunt Edna didn’t just die leaving me her fortunes. In fact, I come from a modest background where almost everything in life I’ve had to earn myself. The reason why I’m going to live a much more comfortable retirement than your average Joe is because I’m planning ahead.
The Power Of Compound Interest And Tax Protected Retirement Accounts!
When I was 20 years old I opened up a Roth IRA with an investment company putting money towards mutual funds. If you don’t know or understand what a Roth IRA is or the difference from a Traditional IRA you can find some clarifying information here. When I initially opened my account I put the maximum allowable amount for the current and previous year, which at the time was $10,000. Since joining Active Duty I have been continually putting money into this account. Currently, you are allowed to contribute $5500 annually to one of these tax protected accounts. By splitting this up into dollar cost averaged monthly payments of $458.33 ($5500/12 Months) I’m taking advantage of two benefits:
1. I don’t have to actively follow the markets to try and time when to put in all of my money for the year.
2. Any serious dips in the market are averaged out by the swells.
If you haven’t checked out one of the free IRA calculators online you need to right now. Your money can be very powerful if you let it work for you over a lifetime. Using an initial contribution of $10,000, a monthly contribution of $458.33, and a modest estimated return of 8% (I’ve seen returns of around 20% so far) by the time I’m 59 ½ (the age when you can withdraw all of this money without penalty), this account will be worth around $1.5 Million!!! And It’s All Tax Free!
Now assuming an average annual inflation rate of around 3% my $1.5 Million won’t be worth the same as it would today, but it’s still a significant amount. Play around with the numbers in the calculator and see just how staggering the power of your own money can be.
Now you might be saying to yourself right now, “How could I possibly put away $458.33 each month? I can barely make it paycheck to paycheck.”
Here are your three guaranteed tips for success:
1. You don’t have to start maxing out the account. ANY contribution now will pay dividends as the years go by. If you can only afford to put aside $100/month, start there, then work your way up as time goes on.
2. Set up an automatic payment that takes money out of your account at the beginning of the month. That way you can’t spend it on things you don’t really need. From the very first day I started getting a military paycheck, I scheduled an auto withdrawal to take my monthly investment out of my USAA account before I could even see it in there. I am used to living on a paycheck that is $458.33 less than what it actually is, but I don’t know the difference because I’ve never even seen the money!
3. Think really hard about your priorities in life. Do you really need that brand new Ford F-350 Super Duty Turbo Diesel right now and the monthly payments that come along with it? Do you really need to eat out every night of the week and pop bottles every weekend? Cut out some of the unimportant expenses and put that money into a retirement account.
Use just a portion of your money wisely now and reap the rewards for the rest of your life. Future you will thank you. Trust me.