But, wait! Did I say that almost everybody could be a millionaire? You heard it right. Let’s say that you just left college at age 22. You put $2259 away each year and net 10%. By the time you are 62 you have your million. That’s less than $200 a month. Of course, if you got 11%, you would only have to put away $1719, or less than $150 per month. But, 11% net is pushing the edge of the likely outcomes.

There are a few tricks to this game:

1. Start early. If you wait just five years to start, the annual cost goes up to $6079 (or $5025 at 11%). The longer you put off starting, the steeper the climb. Wait long enough and you won’t have any chance to meet your goals.
2. Get market rates of return. Most people don’t come close over their lifetime. Invest in equities through thick and thin. Keep a long term horizon and ignore the short term noise.
3. Rate of return does matter. But, if you are assuming a return higher than the long term historical averages, you are kidding yourself. If your plan is built on an assumption over 10% net, you probably will fail. You can’t directly control the ultimate investment rate, but you can control how much you save.
4. Control taxes. Maximize use of tax favored vehicles like IRA’s and pension plans. Use tax efficient funds with low turnover in your personal accounts. Buy and hold.
5. Control costs. Mutual fund expenses, or brokerage fees and commissions can eat up over 1.5% of your market returns if you are not careful. Use no-load index funds.

But, the real trick is to plan, and actually have the discipline to save. Hope is not an action plan! You, and only you can make it happen.

Please don’t tell me that you can’t afford $150 to $200 a month. I don’t buy it. Most people find the money if they want a new car or stereo. You may spend that much for your morning jolt of cafe latte. Do you really want to be a millionaire? Or, do you just want somebody to give you the money? (Hint. It aint’ going to happen, Dude.) You decide.

How much will it take you to make your goal? Check out our goal calculator. To run the calculator on your web browser you will need Microsoft’s Internet Explorer Version 4.01 or higher with the Office Tools installed. All this can be downloaded for free from Microsoft’s web site.

Frank Armstrong, CFP, is the author of Investment Strategies for the 21st Century, published here, President of Investor Solutions, Inc., a fee-only Registered Investment Advisor, and Chief Investment Strategist of DirectAdvice.com.

Note: The featured writer is solely responsible for the content of this article. The opinions expressed herein are not necessarily those of MFI or BES, Inc.

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