Becoming a millionaire really is this simple. Live on less than you make. Invest the difference. Let compound growth do the work over time. Why doesn’t everyone do this? Well as Warren Buffet says, “because nobody wants to get rich slowly”.
The math in this example assumes a 10% return on your investment. That’s about what the US stock market has averaged over the last 100 years. Sure, this doesn’t take into account inflation, but it also assumes no raises over the 40 years as most people are likely to increase their income and investments over time.
An index fund is a simple way to invest in an entire market. Check my other posts on what is an index fund.
A Roth IRA is a special “Individual Retirement Account”. Any money invested in your Roth IRA is never taxed again. That’s how you end up with over $2M at retirement tax free.
Spend a little less during your working years and you get to be wealthy at retirement. (Spend a lot less, and you can retire earlier!)
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.