I recently ran into Budgets Are Sexy’s millionaire’s club. Actually, this is not about real millionaires… it is more like millionaire wannabees 😉 I am usually not a wannabe, but I definitely could get my head around being part of the gang of rich people! This is why I have decided to join their ranks and share my plan to become a millionaire.
I actually talked about a few ideas in the past and my plan is giving me the opportunity to reach the million dollar mark by the age of 45 (or so 😉 ). However, the reason I created an online company with my best friend is definitely to cut this objective down to 35 years old. How I am going to do it you ask? Here’s my list of prerequisite to reach millionaire status and to reach it by 45 (I’ll talk about how I can accelerate the process cutting out 10 yrs later on 😉 ):
#1 Maximize my RRSP every year (which is about 6K per year since I have a decent pension plan). This should give me 213K at the age of 45 (at a rate of 7%, since I am 100% in stocks, I should be able to reach it!). Since I don’t have much time to do stock picking right now, I am using index mutual funds that replicate perfectly the Canadian, American and International markets.
#2 Keep my house. The value is now at 325K, at 3%, it will be worth 537K… not too bad 😉 If I was ever to switch houses, I would need to keep the same value (or more) to make sure to reach the million dollar mark by 45.
#3 keep working on my online company (my share should grow at a minimum rate of 10% for the next 17 years). This is a very fair assumption as it is growing at a much faster rate right now (like more than 100%!). This would give me an additional 151k (now worth 30K). This is probably the part of my plan that will require reassessment on a yearly basis to know how good (or how bad!) and I am doing with it. We will surely hit an income ceiling at one point since we are quite limited in the time we able to invest in it. At that time, some real questions will have to be answered; do we keep doing it “for fun” or do we want to create a full time company with it?
#4 Keep my pension plan. This is very hard to put a value on. However, at the age of 45, it would include 22 years of contributions. At full retirement, it will give me 70% of my base salary. Hence I figure that my pension plan will be worth at least 200K at the age of 45.
#5 Pay off my debts! If I am able to pay off 150K in debt over the next 17 years, I will be able to drop my debt to 100K. Since my first plan to become a millionaire, I have quit my Smith Manoeuvre strategy in order to shift my investments into my online company. I have also temporarily cancelled my systematic investment plan since we are now living on a single income. I prefer to concentrate on paying down my debts since my family is depending on my capacity to earn enough income from year to year.
This would put me at about 1M$ by the age of 45. While a million dollars is a lot of money, this won’t mean as much in 17 years… This is a bit disappointing when you think about it!
This is why I must find a way to put more fuel on the fire and make it happen at the age of 35! While reaching a million dollar net worth at the age of 45 seems virtually feasible (without much effort), becoming a millionaire by 35 will require a lot more effort and I will have to take much more risk…. Oh well, it doesn’t sound like I am afraid of it anyway! How am I going to do it?… nah… not in this post folks…
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