How To Become A MILLIONAIRE Investing £10 PER DAY!
If you’re like me, you probably grew up learning how to save your money but investing? Nope!
No one taught me, growing up, how to actually make money grow.
Have you ever tried to work out how long it will take you if you actually started to save money today to become a millionaire one day?
Try doing the math.
Let’s look at some hypothetical examples.
How long would it take you if you saved £10 every single day to become a millionaire?
I did the math, and it works out to be 274 years, which is insane!!
In fact, if you save £1,000 every single month, it will still take you around 83 years to become a millionaire.
So that must tell us something – Saving money alone is not the way to go about becoming a millionaire.
Especially given today, the returns we get on saving our money in a normal savings accounts is typically around 0.1% or close to it.
So in order for us to hit those high goals of potentially becoming millionaires one day, how else should we go about doing it?
How To Become A Millionaire
Today we’re going to explore how to become a millionaire, saving and investing £10 per day.
I’m using the example of £10 because it’s something that pretty much everybody can relate to.
If I said to you, £10 per day works out to be £300 per month.
A lot of people can relate to that.
That number seems highly realistic.
But if I told you that it’s actually possible for you to invest that money every single month, consistently in the right environment over a long period of time for you to hit a million pounds.
Would you believe that?
Well, today we’re going to dive into that and illustrate to you how you can go about doing exactly that.
More importantly, what you need to do next, in order to take those steps and begin building up to potentially one day becoming a millionaire.
Real-Life Scenarios of How to Become a Millionaire
To make this super practical and fun for you, I’ve created a few scenarios, which will demonstrate to you the impact of what I’m talking about.
SCENARIO 1: £10/day (£300/month) generating 0.1% return
Imagine that you have decided that you are going to accept the challenge of putting away £10 pounds per day, you are actually going to save that money.
£10 pounds per day is about £300 per month. Let’s assume that you put that money aside into your savings account making 0.1% interest.
If you saved this amount for the next 40 years, the returns you’d expect on your money will be a final value of around £146,924.
This will include total deposits of £300 each month of £144,000. With interest earned of only £2,924 pounds.
Just think about that for a moment 🤔.
40 years of saving your money in your savings account at 0.1%, will give you only £146,000 after 40 years of saving that money in your account.
Now let’s look at a scenario where we keep all the variables exactly the same but assume there are two families.
Family #1 – The “Safe” Savers 💰
Family #1 are worried about investing in the stock market because it seems complicated.
They say to themselves –
Let’s just save our money because it’s nice and safe.
So they’ve been doing that and they end up with about £146,924 after 40 years.
Family #2 – The Investors 📈
Before looking at Family #2, try to decide which family would be a better fit for you to become.
This really matters in helping you take action to start to invest your money.
SCENARIO 2: £10/day (£300/month) generating 8% return
Family #2 have learned to invest and grow in confidence to invest their money through the stock market.
Let’s assume that they invested their money in the S&P 500 Index.
They’re doing that because they want to get themselves exposed to higher returns from investing in US focused companies.
According to Investopedia, The S&P 500, since 1957 through 2018, has returned approximately 8% as an average annual return before you take into account inflation.
(It’s important to note the point regarding inflation, let’s just use 8% for illustration purposes)
Let’s assume that Family #2 invested their money through the stock market and focused specifically on the US equities market.
They had most of their allocation in equities towards that particular index.
I’ve have carried out some calculations on that scenario:
An 8% average return assuming £300 per month, over a period of 40 years returns a total final investment of £1,054,284!
That includes total contributions in terms of monthly deposits of only £144,000.
The vast majority of that £1,054,284 return coming from compounding interest
i.e. money working on money over time, a total of around £910,000 coming from money working money over time.
Just think about that. That’s such a simplistic analysis.
It just really boggles the mind to think, wow, that money placed in the right environment can work on itself and build upon itself and become a life-changing sum overtime.
So the key ingredients are:
Time for money to compound. Grab our FREE Compound Interest Calculator to see this at work.
Money being placed in the right environment in order to generate those high returns.
Now I can hear many people going,
“Oh, Ken, Where exactly are you going to find those handsome returns that you just talked about? I mean, who’s paying you 8% these days anyway?”
Well, I went and had a look because we invest in some of these assets that pay quite good returns over time.
Looking at the Vanguard website and you can look at any other provider for an asset S&P 500 Tracking Fund.
i.e. a fund that tracks the S&P 500 index.
Vanguard, have got one. The code being VUSA (not a recommendation), which you can look up for yourself:
Looking from 2012 to present day and returns vary.
Total Returns = Capital Return + Income Return
The “income return” is the return you get from being paid dividends.
Let’s see how compounding interest worked its magic over the years…
From the above image, 2013 had total return of 31.87%, 2014: 13.25%, 2015: 1%, 2016: 11.51%. And it carries on like that up to 2019: 31.01%.
I’m highlighing those numbers to you , so you can grasp the the reality of what it would have been like if you invested your money in this particular fund over the last few years.
I’m fully aware that this does not tell us what’s going to happen in the future…
It has shown us that if you put your money exposed (with at least 50% allocated to equities) to the right environment such as the S&P 500…
…over a period of time through compounding interest, returns building up and being reinvested you can get good average returns.
You can expect to generate a decent return from as much as 6%, 7% or even 8% over time.
Provided you’re leaving that money working for you over the years to help you work towards that possibility of becoming a millionaire.
Doing this exercise really made me think about a few things.
In these scenarios, I’ve talked to you about, the possibility of you and your family saving and investing £10 per month.
In the first scenario, Family #1 only saved their money and barely got any returns.
And in the second scenario, the Family #2 saved their money and invested it and generated a great return, say over a hypothetical period of time.
What Family Would You Like To Be?
This is an obvious question, but seriously – Which family would you rather be? 🤔
I know for certain, I’d love to be that Family #2 that invests their money.
In fact, we are that family and have been extremely fortunate to have ridden the wave of the stock market success over the last decade.
It has really drastically changed our lives in so many ways.
To become a millionaire one day in any capacity, you must first set the expectation in your mind follow it with action.
Investing your money via the stock market is one powerful way of making it highly probable that you’d achieve this goal if left for long enough.
Another way to think about this investing thing is to consider what happens to your money if only left in the bank.
You lose purchasing power to inflation. You’d basically get less bang for your buck over time.
So essentially, what you should be aiming for is a mindset shift. Invest your money in an environment that generates for you and above inflation rates of return.
In effect, a real rate of return to make sure that the purchasing power of your money is retained over time.
Lifestyle Adjustment, Investing Is Possible
The other thing that occurred to me as I thought about that example is that a lot of people can if they adjusted their lifestyles, save and invest £10 per day.
Now, imagine a scenario where you saved beyond just putting aside money from your salary.
Imagine you did something else on the side, perhaps through a profitable side hustle, to generate for you another £300 per month, in addition.
Such that you’re able to save and invest around £600 per month and in an environment where it generates you a decent return.
SCENARIO 3: £20/day (£600/month) generating 8% return
Here we’re looking at a scenario where we’re investing £600 per month again, generating a nominal return of 8%.
You need to factor in inflation for the real return, but a nominal return of 8% over the same period of 40 years.
You’d see the final investment value over a period of 40 years would be around £2.1 million.
The total amount you’re actually depositing over those 40 years being only £288,000 relatively.
The vast majority of that return that you’re getting (i.e. £1.8 million) coming from the capital returns from your money growing over time, as well as reinvested dividends, and as dividends compound over time.
You know, this just says so much to us.
If you’ve been reading The Humble Penny for a while, you’ll know that…
I’m a huge fan of side hustles or anything, that means that we’re extra income to save and invest in the right environment.
I really hope I have encouraged you, if you’re somebody who’s been sitting on the fence about investing their money.
Hopefully helped you to realise that investing is the most efficient way for you to build wealth over time.
No amount of saving will help you to become a millionaire in this lifetime as the numbers at the beginning of this post demonstrated.
You can’t possibly be around to see yourself become a millionaire by just saving.
So if it’s something you really want to achieve in your own lifetime…
Then investing is the vehicle you need to build up your wealth over time for you to become a millionaire one day.
Think Of Your Children’s Future
The final point I wanted to make is around children.
I’m speaking now to parents or people who are looking to have children in the very near future.
The key advantage that children have compared to us adult is that they have time on their hands.
In the above examples, we looked a period over 40 years.
If you’ve got children, it’s highly likely they’ll be the people who will be around over such a time horizon to see themselves become millionaires one day.
So seriously think about that from your own perspective.
Would you like your children to become millionaires one day?
If so, then the numbers are quite simple.
I’ve demonstrated to you that £10 per day, in the right environments, assuming a decent average return over a long term period, is what you need to become a millionaire.
You can take those steps to help your children one day and get ahead start on their journey to become millionaires themselves.
Formula For How To be A Millionaire In Your Lifetime
Summarising the key points for you to take away:
1 – Investing Is Faster and Efficient
Investing is a much faster and a much more efficient way for you to build wealth over time and become a millionaire one day.
Use money making side hustles to increase amounts that you save and invest.
2 – Think Long Term and Let Money Compound
It’s all about the long term investing.
Think about investing as a long term strategy.
The returns that I talked about, 7% or 8%, as sort of average return that you will generate, assumes a long term horizon of at least 20 years.
3 – Invest Consistently on Autopilot
It’s all about consistent investing.
So you can’t invest this month and then next month, say to yourself, “oh, I don’t feel like investing any longer.”
The key is to focus on investing no matter the current economic climate.
It does not matter if there is a recession or a booming market, etc.
The key is for you to be buy in every single month and this process known as dollar cost averaging helps you to diversify your risk over time.
It also gives you access to assets at different prices over the years as you keep on investing consistently.
4 – Have a Higher Proportion In Equities
So a very simple asset allocation is to allocate a proportion to equities and a proportion to bonds.
A simple rule of thumb is for you to look at, say the number 100 less your current age as the percentage you should invest in equities.
For example, let’s say you’re 30 years old today.
100 minus 30 would mean that you should really be looking to invest around 70% of your money in equities and 30% in bonds.
The reason being that bonds are necessary for offering you that diversification helping to remove some of that volatility tied to you investing your money purely in equities.
5 – Factor Inflation Into Nominal Returns
Remember that inflation is a big deal and will always be factored in when you’re looking at nominal returns.
You need to factor those in, in order for you to arrive at a real rate of return on your money.
6 – Where and How You Invest Matters
Where you invest your money and how much you invest each month matters.
So seek the right environment to generate the right returns for your money.
Look for alternative ways beyond your day job to generate some extra money to boost those savings and increase the amount that you invest every single month.
7 – Think About Your Children
The final point beyond you working towards becoming a millionaire one day is for you to also think about your children.
Help them because they have the time horizon for money to really get to work to generate those returns and help them to potentially become millionaires one day.
What are your thoughts on this lazy way of becoming a millionaire one day? What resonated with you the most? Please comment below 😀
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