Want to Be a Millionaire?
We’ve all read the stories of little old ladies dying and leaving millions to their favorite charity.
The stories are usually peppered with quotes from astonished acquaintances who say things like “We knew she held her ancient bicycle together with rubber bands and wore secondhand clothes until they were in tatters, but we were surprised to hear that she left so much to charity.”
Translated, that could read “We had no idea she was rich! We thought she was dirt poor because she acted that way!”
The thing is, it’s the ultra frugal folks who later donate enormous sums of money to charity that make news. (Or the big lottery winners.)
But people don’t usually write stories about the comfortable millionaires who leave large sums of money to their kids, or about the comfortable millionaires who dole out smaller amounts to a variety of charities.
That can lead to the skewed perception that there are only three basic ways to become well-off:
- Be very lucky
- Become successful at the super-star level
- Live like a pauper so that you can save every penny
Now we’d probably all like to be very lucky or become extremely successful, but realistically the chances of either of those are relatively small compared with everyone else in the entire world.
That leaves “live like a pauper so that you can save every penny”, but who wants to do that? Clearly, not many people.
And you don’t have to.
The thing is, being well off is relative, and living below your means does NOT mean living a life full of deprivation and artificial hardship.
In fact, you can become wealthy without living like a pauper, and without depriving yourself of the things you really want.
It’s a matter of figuring out what the things you really want are. Those are the things (which don’t have to literally even be things) that make you feel content. The things you really enjoy doing or spending time at.
Once you’ve figured that out, it’s a matter of focusing on those things, regularly spending less than you earn, and then (ideally automatically) saving and investing the money you aren’t spending.
And that million dollars? Contribute $5000 a year to a Roth IRA starting at age 29, and you’ll end up with over $1,000,000 in the account by age 65 at an 8% rate of return and a 25% marginal tax rate.