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How to become a millionaire – Anyone can do it

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If you want to become a millionaire then you’re in luck! Anyone can do it, including you!

Getting to $1 million can seem very daunting, particularly if you’re starting from $0 (or a negative number if you have debt). It’s true that getting to $1 million isn’t easy, particularly with Australia’s high cost of living. But it’s totally possible. 

How much do you need to invest for a $1 million portfolio?

No, it doesn’t need $1 million contributed to reach a $1 million portfolio.

Let’s look at some numbers. If you’re 30 and you want to retire at 65 then you have 35 years to build your wealth and build your portfolio. The share market has returned an average of 10% per annum over the long-term. To become a millionaire in 35 years all you need to invest is just $310 a month.

Obviously if you’re younger then you need to invest even less. If you’re 20 you have 45 years and you’d only need to invest $116 a month.

If you’re 40 you have 25 years and you’d need to invest $848 a month. What a difference time can make to how much money you need to contribute

 

yourself.

How can we invest hundreds of dollars a month?

There are plenty of ways to ensure you’re investing hundreds of dollars a month. If your budget has the flexibility then you can just spend a little less on discretionary spending and use that money to invest.

However, not everyone may be able to free up some money in their budget. There’s no easy fix – you’d need to find some extra income somehow. Do a qualification to improve your skills and worth. Do some research about your industry, prepare some justifiable reasons for your boss about why you deserve a pay rise. Maybe you’d need to find a second job. Maybe you need to change jobs – loyalty doesn’t pay as much as it should in some industries.

But don’t forget about the wealth-building tool that most Australians are using: superannuation. Aussie employees should be paid 9.5% of their wage into their superannuation fund. If your annual salary is $60,000 then your employer should be contributing $5,700 a year into your super account, or $4,845 after the initial 15%

 

contribution tax which works out to be just over $400 a month.

What should we invest in?

Most superannuation funds will automatically choose the shares that you invest in for you, all you need to just is just to select the investment option like ‘high growth’.

But, we can be more selective with our investments outside of superannuation. Some investors go for exchange-traded funds (ETFs) with low costs like iShares S&P 500 ETF (ASX: IVV) or Vanguard MSCI Index International Shares ETF (ASX: VGS).

Other investors pick investment managers to do the investing for them like Magellan Global Trust (ASX: MGG) or WAM Global Limited (ASX: WGB).

However, the strongest-performing strategy can be individual shares if you choose the right shares, they can beat the market quite convincingly.

Where to invest $1,000 right now

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*Returns as of February 15th 2021

Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS and WAMGLOBAL FPO. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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