Tip Tuesday

Want to know how to make over a million dollars? Serious.

Read this guest blog. Written by a research analyst, writer and lover of financials, otherwise known as my husband, Nick Rokke.

How To Make Over A Million Dollars

“Today we’re going to talk about money and investing.

No, Emmy’s blog didn’t get hijacked. She asked me talk about this “Nick” subject.

Money is something most people don’t want to think about. It gets in the way of living the good life and having fun.

But the truth is, life’s expensive. And if you want to eat healthy, keep fit, and experience the things of life, you’re going to need money.

Below you will learn about 5 super easy things you can do that will make you a million dollars in your lifetime. And it’ll only take an hour or two.

Don’t believe me? Keep reading.

Here’s the start of your plan. Sock away $2,500 a year. That’s it. Especially if you’re young. If you can do that starting at the age of 30, by the time your 68th birthday rolls around you could be a millionaire. All you need to do is earn 10% a year on your investment. Not coincidentally, that is what the stock market has averaged the past 100 years.

In the spirit of Emmy’s listicles, here are 5 easy things to do to make the most out of your savings.

1. Invest in a retirement account such as a 401(k) or IRA. Yes, these accounts have restrictions…you can’t withdraw the money until you’re 60 years old without a penalty. But the savings you get by not paying taxes is amazing.

There are two kinds of 401(k)s and IRAs. Traditional and Roth. Traditional allows you to invest tax free money, and then you only pay taxes when you withdraw the funds. A Roth forces you to pay taxes before investing, but you can withdraw your investment tax free.

The tax benefit is the same either way. You’ll either save about 20% on the way in or the way out. For our plan, by paying taxes right away, you’ll only be able to contribute $2,000 a year. What will that $500 difference mean for your retirement in 40 years? Almost $250,000 less – by investing in a retirement account, you can have a quarter of a million dollars more.

In the tables below, year 1 is the first year of your savings. In our example above, the first year of savings was when we turned 30. But it could really be any age (the sooner you start the better!) Here are the numbers:
millions-1

2. Take advantage of your employer’s 401(k) contribution match. Not all employer’s do this, but many do. You need to check on this. Even if your employer only matches half of your contributions, it can make you an additional $600,000.

Here’s the proof.

millions-2

3. When picking what fund to invest your hard earned cash, pick the one with the lowest fees. Countless studies have been done showing funds with high fees have the same performance as those with low fees.
Where can you find this information? Every fund has something called a “prospectus.” And on there you should find a little box breaking out expenses. You want the total fee to be as low as possible. The low fee funds have an expense ratio around .25%. That’s pretty good. High fee funds are typically 1.5% more.

The rub is, this is a stealth fee. You don’t write a check to the fund for 1.5% of your assets every year. The fund just takes a little behind the scenes so you don’t even realize you’re paying a fee. It essentially comes out of your return. So what would normally be a 10% return becomes an 8.5% return after fees.

That additional 1.5% may not sound like much, but over the course of our plan it will cost you over $400,000. Proof:
millions-3

The only difference here is the return rate. A couple well-known fund families with low fees are Vanguard, Fidelity, and Cambria.

The total savings from the first 3 tips: $1,250,000

4. Don’t try to time the market. Most investors destroy their retirement portfolio by trying to buy and sell. One recent study showed the average investor makes 3% a year on their portfolio. Why? Because most novices buy and sell at the worst possible times. Such a low return will almost guarantee you’ll be working forever.

Unless you are able to spend over 20 hours a week following the market, you should leave your investments alone.

Just keep putting your money in the funds and your money will grow.

5. If you have any questions about these things, don’t be afraid to hire a financial planner. Yes, you’ll have to pay these guys a little, but they should make you more money than they cost. At least if you find a good one…Ask around and find references before selecting one.

There you have it. Five quick and easy steps you can take to save yourself over a million dollars in the next 40 years. And it’ll only take you an hour or two to get this set up.

Now we’ll take you back to Emmy so you can learn how to stay healthy to enjoy the fruits of this article.”

 

 

Good luck and Happy Tuesday!

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