A10% plan can build your wealth.
Do you think a person earning $20,000 per year can become a millionaire? Absolutely! Anyone can do anything they set their mind to it and if they develop a realistic plan and stick to it. Let’s take a look how.
John is a hard working man earning $20,000 per year in his job. Through the lessons he has learned in this course, he has learned to reduce the money he is spending on taxes, life and health insurance, health care, food, and cars. He has also learned the importance of planning for retirement and purchasing his own home. He is 35 years old, and has set a goal of having $1,000,000 when he retires at 65. What must he do?
First, by reducing many of his living costs, John has worked into his budget a 10% savings plan. This means he will be able to invest $2000 per year into a tax sheltered Retirement Account (which by the way, further reduces his taxes). John has selected a no-load mutual fund as his investment vehicle using the strategies discussed in volume 2 of this course. His fund gains an average of just 15% per year over the course of 30 years. How much do you think this has earned him?
$2,000/year x 15% return on investment (compounded) x 30 years = $739,066.
Well, John has not quite reached his goal yet. But remember, he is also investing in a new home. He knows that real estate will appreciate on average at 5% per year (national average). John finds a nice home that suits his taste at 10% below fair market value using the rules of this course for $80,000. The house is actually worth $88,000.
Starting value of $88,000 x 5% annual appreciation x 30 years = $393,161.
So, at age 65, John has $393,161 in equity + $739,066 in his mutual fund, which equals $1,132,227. You see, John has surpassed his goal.
Your objective is to make available for savings, 10% of your income. If you cannot achieve this simply by reducing your expenses, you must increase your income. Hopefully, you will follow all the rules in this course and do both.