Who Wants To Be a Millionaire?

I was looking through my files and saw an old Excel file on the accumulative effect of a good investment plan. I thought it would be interesting to show you. If you want to be a millionaire it’s either easy or extremely difficult – mostly, it depends on your age. There are other factors that are much more flexible but there is no getting around the ‘age’ thing.

My friend Henrik told me a story he read about a guy struggling to get by on a million dollar a year salary. I was dumb founded having heard the story but I can understand the premise behind the rational. However, I felt sorry for myself because I can’t relate. Luckily for the rest of us and surprisingly, you don’t have to be born with a silver spoon to retire rich. It is also interestingly, you don’t have to have a job that pays very well neither. Don’t get me wrong it wouldn’t hurt to be born rich or to have a high paying job if your goal is to become a millionaire.

Two Simple Plans

The Installment Plan

You start with just investing $200 per month every month in an investment that gives you a return of 15 percent annually. It would be difficult to find this kind of returns but it is not impossible. The hardest part is if you are procrastinator like me because you will need to invest this money every month for 30 years. Here’s what your investment would be at the end of thirty years. Look at the big difference if you only have 20 years.

		10 Yrs		20 Yrs		30 Yrs
Pmt	Rate	Future	PV 3% Inflation	Future	PV 3% Inflation	Future	PV 3% Inflation
100	15%	27,522	20,396	149,724	82,232	692,328	513,081
200	15%	55,043	40,792	299,448	164,464	1,384,656	1,026,162

The Lump Sum Plan

You start with putting $20,000 in an investment that will give you a return of 15 percent per year. Yes, the investment duration is also for 30 years. The result is surprisingly similar. Here’s what your investment would be at the end. Again, if you only have 20 years left – difficult.

		10 Yrs		20 Yrs		30 Yrs
PV	Rate	Future	PV 3% Inflation	Future	PV 3% Inflation	Future	PV 3% Inflation
1,000	15%	4,440	3,291	19,715	10,828	87,541	64,876
2,000	15%	8,880	6,581	39,431	21,656	175,082	129,752
3,000	15%	13,321	9,872	59,146	32,485	262,623	194,629
5,000	15%	22,201	16,453	98,577	54,141	437,705	324,381
8,000	15%	35,522	26,325	157,724	86,626	700,328	519,010
10,000	15%	44,402	32,906	197,155	108,282	875,410	648,762
20,000	15%	88,804	65,812	394,310	216,564	1,750,820	1,297,525

The moral of the investing story is start early, very early. Make sure you have more than 30 years left. The sad truth of only having 30 years on this plan is obvious. If this is you, think of the more positive aspect, it wouldn’t be so negative for your kin.