Updated: Aug 24, 2020
A lot of people have the paradigm that my job doesn’t provide “Enough Income to Become Financial Free.” But the truth of the matter is, it doesn’t matter how much you Make in a year but the way you Spend your hard-earned dollars in a year. I am not going to go into a long diatribe on how being frugal or how budgeting is the best way to save money. The psychology of how the human mind operates and the ability to get rid of “I am just going to treat myself” mentality is critical. Spending can be difficult to navigate, even the most disciplined spenders can always find something we need to have that only costs a few hundred dollars or less. I look at it from a different angle, how about you just cut one major cost from your daily life. I am talking about those automatic payments that come out each month! No need to make a budget or monitor your spending; just make this one change and you will be on the path to becoming a millionaire!
Did you know the average Canadian spends $800 Dollars a Month on Vehicle Payments? That adds up to a yearly amount of $9,600. My suggestion is to find a vehicle that doesn’t cost you anything.
Take the $800 Dollars a Month and Invest it into any Index fund. My personal favorite index funds that anyone can buy are Vanguard Products. Super easy to trade, all you have to do is setup up an automatically invest withdrawal of $800 Dollars a Month into one of their Funds. I won’t go into detail about what an index fund is, but they are the Safest and Best performing Investment anyone can have. There is a short video posted at the end of my article with Warren Buffett who is the greatest investor of all time talking about how he could’ve turned $114 into $400,000 purchasing the SP500 index. You need very minimal investment knowledge to do this. For my example; I will use a standard baseline Investment of the SP500 that brings an ROI of 12% a Year, this ROI changes every year, it could go up or down but over a ten-year period of time the SP500 will return 12% a Year! What you do is invest that $800 Dollars a month which is referred to as “Dollar Cost Averaging” into this for 23 Years and it will build to $1,004,187, that is the power of compounding interest. For any kid that starts this at age 25, he could be a Millionaire by age 48 by Never Financing a Vehicle.
How’s that for rolling in style? That old beat-up Honda Civic that was your first vehicle isn’t so bad after all! But to challenge my Principle say we are going to need to buy another vehicle during those 23 years, yes you can do this with the money you invested. By purchasing a new vehicle every 10 years, only spending $20,000 dollars that you withdraw from your Investment Account to pay for it. In 30 years, your Investment would be worth $2,061,740. Now what's even more amazing you can buy a new vehicle with this money and still become a millionaire. You just have to start and give the power of time to Compound that $800 Dollars a Month contributing to an Abundance of Wealth. But let’s take this one step further say every time you need to buy a vehicle you were able to find the money for it from some other way of saving and continue to contribute $800 Dollars a Month for 30 Years your investment would grow to an astonishing $2,316,793 start that at 25 years of age and by 55 you would be able to Retire! The best part is your yearly ROI from this beautiful nest egg will bring you a $278,015 Yearly Income that you can use to live the life of your dreams at age 55, all by Never Financing a Vehicle.
I used $800 dollars as my baseline because it is the average cost a Canadian spends financing a vehicle a month but to put this principle into effect you just need to get started. If all you can save right now is $300 dollars month then that’s what you start with. I hope the main take away for anyone young, or even getting closer to retirement, is that investing is the best way to set you up for the future. Do what you can now and your future self will be thanking you later.
I know life gets difficult sometimes, things may not go your way, but find a way to pay yourself first before you pay anything else. Becoming a Millionaire really isn’t that hard, you just need Discipline and Time. Stick to the plan of Dollar-Cost Averaging for the next 30 Years, punch yourself a one-way ticket to Early Retirement.
Thank you to anyone who took the time to read this. I am passionate about investing, business, and finance and will continue to make short articles that I feel could have a huge impact on people's lives. Being financially free is a choice anyone can make, just get started today!
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