At What Age Do You Want To Become A Millionaire?
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Some people will keep their job indefinitely and live a modest life. Others that are less fortunate will be condemned to flip burgers and seek for payday loans all their lives. And, there is a small part of this world who is trying to make more money and become millionaire. So asked myself that question: At what age do I want to become a millionaire? |
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The easy answer is “as soon as possible” but that is not a goal, it’s a dream. In order to transform a dream into a goal and eventually into reality, I need to setup a plan, I need to look at all my possibilities.
So today I am trying to see what I can do to worth 1M$ by the age of 40. This means I have 13 years left to achieve my goal. My present net worth is about 49K so I am far behind my goal!
My first way to the top would be my Smith Manoeuvre account. Counting a $400 month deposit with a 7% return, I should get about 120K in investment on my 40th birthday. That’s a great start, I am at 170K now 
On my RRSP side, I can put roughly $2,500 each year since I have a pretty heavy pension plan. Counting an investment of 2,5K every year with a 7% return, my rrsp account should worth about 65K with what I have in my account as of today. We are now at 235K, it’s almost 25% of my objective
Even though I am doing a Smith Manoeuvre, I am still paying a part of my mortgage as well. With a rough calculation, I should be able to pay down my mortgage by another 65K by that time. This would make 300K net worth at the age of 40… still short by a lot of money right?
But wait, I am not done yet! My house will also grow in value (hopefully!). According to an increase in value of 3% per years (the housing market historically raises by 4 to 5% in average per year), my house would worth about 405K. Since it was appraised at 275K last year, my net worth would grow by another 130K. 430K net worth and still increasing!
Wait! I do have a pension plan as well! While this is very difficult to assess (it is a determined pension plan), I would make the following assumptions: It is now worth about 4K and would grown by 7K in capital every year at a 7% return. I used the 7K since I have 9,000 in RRSP room contribution less 7K in Equivalence Factor due to my pension plan. So that would create an additional 150K. 580K total net worth.
This really not going to make it for 40…. However, the good news is that if I wait until I’m 50, it becomes really easy. It would bring me to a net worth of about 1,3M$, well diversified between property, registered and non registered investments.
There is one more thing to think about; inflation rate. All my calculations were made with today’s dollar. So even then, I would not be a real millionaire… So in the end, I better off revising my plan so I can make more money faster!!!
Do you have any tricks to become a millionaire sooner?
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May 13th, 2008 at 6:26 am
You obviously started too late. 49K at age 27 is good compared to Joe Sixpack, but nothing fancy compared to what diehard savers might have. Tip: Increase your $400 a month to $2000 a month and you will have a million when you are 40, assuming a 7% return. Could you change jobs, get a second one or start a side business?
May 13th, 2008 at 6:36 am
Pete: $2000 a month is about what I make net (I live in Qc, so I’m taxed at 50%
). I think the side business would definitely become my alternative. At least, I’m on pace to become a millionaire at 50 
May 13th, 2008 at 8:16 am
“So even then, I would not be a real millionaire”
Yes you will, but $1 Million will not be worth what it is today.
I may draft a similar post on my blog to attempt to extrapolate when I’ll reach the million $ mark. I might simply just use the average value that I have been able to increase my net worth per month and extrapolate that out. This should be a conservative estimate though because as numbers get larger, investment returns get larger and this would not take this growth into account. I think you’ll probably reach your goals sooner than you think you will because you are dedicated to this goal. You are likely not accounting for windfalls, and raises in your income over the years…
May 13th, 2008 at 12:08 pm
FB, when I was your age (not that long ago
), I think I had a negative net worth so I think you’re doing great.
Remember that your salary will increase, and possibly substantially since you’re quite young so the $400/mth, the RRSP contribution AND the pension will increase and compound as well. That right there will probably be enough to get you to $1MM by 40 if you keep or increase your savings rate.
May 14th, 2008 at 7:38 pm
I’ll likely stop working before I can become a millionaire (outside of retirement accounts and home owned value). I think I can make enough investing before I have $1 mil. to keep me happy and that’s all I want.
May 16th, 2008 at 7:42 pm
For me, I think maybe by the time I’m 35 (that’s in 10 years), but it won’t be just my money since I’m married. The hubby and I have around 240k now and we’re saving maybe 80k a year. I want to quit working before then and just manage my portfolio and write.
May 17th, 2008 at 3:27 am
I made the $1m mark around age 46 with a similar plan to yours. If I’d wanted to become a millionaire by 30 I would have had to start earning money sooner (I stayed at Uni till my mid-20’s and continued studying part-time after that) and either started a business or invested with lots of gearing in real estate. I would have either made a million by 30, or been broke at that age. I chose the “slow and steady” route
My eldest son has just turned 8 and has a NW similar to yours - I invested a few thousand for him in shares that have done really well (the opposite to diversification sometimes pays off!) and he earned about $10K doing a paper round for two years (with a LOT of help from dad) which invested in an online savings account paying 7%. Since this investment is “earned” income, he is entitled to the usual $6K pa tax-free threshold, so it’s tax free. I expect he’ll make $1m NW by the time he turns 30, even following the “slow and steady” route. Goes to show the massive benefit of starting early.
To get to $1m sooner I’d suggest you look at moving to a higher paid job (maybe get higher education qualifications) and a lower taxed locality. Paying 50% tax on an income of $24K is insane.
For example,iIn Australia the typical starting salary for a graduate is around $36K and the marginal tax rate is 30% at that income level, and the average tax rate is only 17% (ie. you pay around $6150 tax on $36K taxable income). If you used leverage to invest, having tax-deductible interest greated than the investment income (negative gearing) would reduce your income tax even further. You’d end up paying capital gains tax on the investment growth instead, but the CGT rate is half the income tax rate for investment held for more than 12 months.
May 19th, 2008 at 8:53 am
Enough Wealth,
thx for the tips ; I already did a few moves though:
- Got a job with a high bonus potential (which cannot be calculated now)
- Leverage to invest so my mortgage will become tax deductible
- I can’t move elsewhere for now. We pay a lot of taxes, but I really like where I live…
- I will definitely start investing for my children so they get their first 1M$ before their daddy did
May 26th, 2008 at 6:01 am
[...] I have been given the opportunity to write for The Financial Blogger about when I expect to become a millionaire. Mike asked me to write about this topic as to complement his article on when he expects to be a millionaire. [...]
May 26th, 2008 at 9:40 pm
My only tricks are reinvesting dividends. Yep, so far that is my only “trick.” Of course, that includes things like saving and not spending money on junk, etc. But my income just isn’t high enough yet for larger investments like RE.
Since I’ll need 26 mil (at least) by the time I’m “retiring,” I have to get working…. since I’m still in negative net worth.
But I’m an optimist when it comes to age. I started young, but I wasn’t able to start with much. I have more and more confidence going forward, and that starts to snowball too.
June 17th, 2008 at 1:58 pm
I live in the Montreal area. I have been saving money for years. I am 28 and have in the area of 60,000 +/- mostly RRSP and mutual funds. We have a lot in common. Keep it up. 2000/month is completely unrealistic in Quebec or most of Canada. Living in Quebec is a disaster from a taxable point of view. I was working a few evenings a week and managed to increase my 250/month to 1000/month in the past few months.
Here are a few tips
-Make sure you trust your financial advisor and the firm he/she works for
-Make arrangements to transfer funds directly from your bank account to your Investiment account
-Make sure the funds you own are low-fees. When you owe several funds and have less then 100,000$ in the market, these fees can add up to a significant amount.
-Be patient, you have many years ahead of you