If you ask a financial planner what you need to be comfortable in retirement, you often get the “million dollars” answer. Of course, depending on how you live your life, it could be a lot more or a lot less. But arguments aside, a million bucks is a nice goal so I’ve constructed a game plan for young people that involves just $6 a day!
Of course, the older you are, the more you will need per day to hit the magic million mark, and you probably will need advice to make it happen.
Before explaining my $6 a day plan for budding millionaires, now in their 20s, let me share with you 20 ways to put yourself on the road to becoming a millionaire.
1. Have a financial plan to make it happen and do it with or without a financial planner. But it’s the starting point that creates the vision of you as a millionaire.
2. Read what millionaires read — business sections, money magazines, financial websites, etc. 3. Don’t be afraid of second jobs. When I was a schoolteacher, I tutored economics at the University of New South Wales.
4. Buy a home and strive to pay it off quickly — it’s very tax effective as it doesn’t attract capital gains tax, if you sell your principal property.
5. Learn how to do renovations and how to hire good trades people effectively. Understand the economics of renovating, as it gives tax-free capital gains.
6. Become a landlord and use the tax system to help you reduce your tax bill to give you cash flow to own a property that gives income and grows in value.
7. Use the increasing value of your property to buy another property to rent out, to reduce your tax bill and pick up more capital gain.
8. You can borrow to buy shares. You don’t have to go over the top but this could be an alternative to being a landlord. You could have a portfolio of great income paying shares and you could borrow to hold more of them using the tax system to reduce the cost of the play.
9. Start a small business. This can be risky but it can give you control over the life you want to lead and can give you financial rewards.
10. You could take in a lodger to help pay off your property quicker — this could be good for a young person who might otherwise share accommodation with other young people. The granny flat option can also make a property play work for you budget-wise, as you receive income and get tax deductions.
11. Don’t always buy new stuff. New cars lose so much as soon as you drive out of the dealership!
12. Look after your stuff. Get your car serviced regularly to prevent big, costly breakdowns and look after your house for similar savings.
13. Get a money mentor, great adviser or accountant to show you things that others miss out on.
14. Do courses to ensure you get promoted at work to pump up your income to increase your investments. You should be building up your personal brand and remember, anything worth doing is worth doing for money.
15. Don’t be a scab. Invest in success for your career, your business and your wealth-building knowledge.
16. Become an expert on things such as tax, stocks, property, etc. and the rules that can give you a financial edge. This will ensure you have the best home loan, credit card, term deposit, etc.
17. Shop really smart. Find good op shops!
18. Do a budget to see what you spend and where, and try to GST your life by cutting spending by 10%.
18. Look at the table of good performing super funds over 10 years and compare yours to them. And if your fund doesn’t compete on returns and costs, then change!
19. Drink less booze and eat better. The first will ensure your brain is clear and always competitively focused on your dream to be a successful millionaire. The second will mean you’ll have less sickness, which saves you heaps and ensures you can work to earn income longer than those who wreck their bodies.
20. Remember that getting rich comes daily not in a day.
Now for the $6 a day “million dollar” plan.
The experts say if you save 15% of your income for 40 years, then you’ll be comfortable in retirement. But I think $6 a day, which goes into super, will make you into a millionaire!
I’ve seen calculations that say if you save $2,000 a year between the ages of 21 and 30 (that’s $20,000) and you average an 8% return, it will be over $500,000 by retirement. If you keep doing it until you retire, it will be over a million bucks.
But let’s take out tax and assume a lower return but factor in the fact that you’ll get 9% compulsory super from your boss, which goes to 12% over the next few years. With your $6 a day into super trick, this guarantees you’ll end up a super millionaire.
Of course, you could save outside of super to have access to your savings but you’ll be taxed more. However, you could use your savings to pay down your mortgage, which is more tax-effective.
Why $6 a day? Well, that would mean you save $42 a week, which over 52 weeks is more than this $2,000 figure, which can turn magically via compound interest into a million dollars!
Of course, you must have the dream to be a millionaire. And you must always remember that you don’t get to be a millionaire in a day but daily. I know I can be repetitive but I’m trying to break down years of bad habits and thoughts as well as behaviours that could cost you a million dollars!
Finally, if you can’t motivate yourself to do this, then pay someone to help you do it. Being a scab could cost you a million dollars, or more.
(TIP: Go back through this list and see how many of these tips you’re doing right now. Give yourself a score out of 20. If you’re not over 15 out of 20, you’re not in the millionaire zone.)