“No one’s ever achieved financial fitness with a January resolution that’s abandoned by February.” – Suze Orman
Working toward financial freedom is a great goal. Some say lofty. I say if you can believe it, you can do it.
No doubt you have heard the naysayers tell you it can’t be done.
Well, I have read enough stories to know that anything is possible.
They say you become not what you want, but what you believe.
Therefore, only you can decide what is best for you and what you can achieve.
In a previous post, I share with you my view on how to join the ten percent club of wealth.
Well I’m back again. Just in case you missed the last one you can read it by clicking on the link above.
This time I will focus on the top five percent of wealth club.
Let’s keep it simple and define families in the top five percent as those with a net worth of $1,500,000.
That is simply 1.5 times the top ten percent net worth of $1,000,000.
That means that if you fall into the top five with a net worth of $1,500,000 in 2018, you have more wealth than 95% of the population. And you are a member of the top five percent. Let’s pop the cork and champagne all around.
How do you get to $1,500,000? In keeping with simplicity, you could have a paid off home or home equity with a value of $500,000.
The other $1,000,000, which is needed to reach the upper echelons of wealth in the five percent club, would be in savings and investments.
To accumulate $1,000,000 in savings, you need to save $8,500 a year for 30 years starting at age 35 and earn a rate of return of 8%.
Side note: If you can accumulate $100,000 in a retirement account, it will take another 30 years to have $1,000,000 without adding another penny just from compound interest of 8% or above.
Check out this chart from the book I read called the Automatic Millionaire by David Bach and see how much regular saving can get you to millionaire status.
So, keep this in mind. If it takes you 15 years to save up a $100,000 in a 401(k), then in another 30 years you could be a millionaire. And that’s if you stop contributing.
However, saving is habitual. The likelihood of that happening is very slim. Therefore, you would likely reach millionaire status before 30 additional years of compounding your savings. Just knowing you have the option to stop contributing is a whole other thing all together.
This means you have more options. For instance, you could put money in certificates of deposit (CD’s), money market accounts, a Roth IRA or just a savings account. Then use these funds to start a business, pay for your nieces, nephews, or grandkids college educations, or go on an around the world vacation.
Either way you have more freedom or options that were not there before.
I read numerous books on personal finance to help me decide financial freedom was the way to go. I just read the book reviews on Amazon before purchasing. The Automatic Millionaire also has a workbook you can check out as well.
This is just something to chew on. Now let’s get back to the being a five percenter.
Basically, you could amass an excellent nest egg of a $1,500,000 net worth by paying off a $500,000 home and saving $8,500 over 30 years to join the top five percent. All this done simultaneously over a 30 year career, would equate you to having accumulated a net worth of $1,500,000.
No matter what the numbers or how long it takes you, such as saving $5,000, $10,000, or $15,000 annually doing this continually and consistently yields results.
The key is to be consistent. It is the same with building muscle, but instead of building up your body you are building up your wealth. Understand this: both require discipline and repetitions. Do your reps. Earn money, put it to work, leave it alone. Repeat.
Money can’t sit still. Money can’t just be idle. Money has to be invested, so it can be put to work making more money. That’s right. Invested dollars work 24/7/365. Even though you cannot, your money can.
Imagine being in the top five percent club of all wealthy families in the world. It is amazing what discipline, savings and compound interest can do.
I know what you’re thinking. That is incredibly hard to do in today’s gig economy.
Where others see problems, I only see solutions.
Walt Disney was laughed at for dreaming up a talking mouse. However, he stuck with his passion which was drawing and made it happen. He said, “If you can dream it, you can do it.”
Let his words inspire you.