These days a $50 note in your purse or wallet doesn't seem to go very far at all. While unavoidable living expenses of course take up the bulk of most of our wages, I'd guess that plenty of readers (myself included) will also see the odd $50 note disappearing each week on non-critical expenses such as dinners, movies and the like.
While the enjoyment we receive from experiences such as dinner with friends has a value in its own right, every dollar we choose to spend in this area is a dollar less we have available to save and invest for the future.
It's easy to spend but hard to save…and that's why smart people use a budget.
Setting aside "just" $50 per week for 40 years at an effective interest rate of 10% will grow into $1,150,741. It's almost scary when put into that context! That $50 which disappears each week, if invested wisely from the age of 25 would alone make you a millionaire by the time you turn 65.
Achieving a 10% return is achievable too.
While buying and holding a stock for 40 years that will continuously grow at 10% may be a tall order, if you select the right stocks to begin with you should only need to adjust your portfolio from time-to-time.
For example, over the past decade the following three widely-held stocks have each provided a total shareholder returns (TSR) above 10% per annum (pa).
- Woolworths Limited (ASX: WOW): TSR of 16% pa.
- CSL Limited (ASX: CSL): TSR of 25.3% pa.
- Origin Energy Limited (ASX: ORG): TSR of 13% pa.
Selecting these types of quality companies and consistently investing for the long-term can lead to serious wealth creation and put millionaire status within reach.
