People buy lottery tickets hoping to win the big jackpot and become an instant millionaire, but most of the tickets sold in Mission Viejo ultimately end up in the trash. Winning the lottery might not be in your future, but having $1 million in your bank account at retirement is a goal you can achieve with a little planning and discipline.
If at 25 years old you start saving toward your retirement fund, you can have $1 million by the time you reach 65 years of age. All you have to do is invest $405 a month at an annual rate of return of 7 percent while adhering to the following rules:
- Live a modest lifestyle
- Make stocks your primary investment choice
- Keep control over your debt
- Stay the course
Living a modest lifestyle
An easy way to ensure that you will not meet your goal of being a millionaire by the time you reach retirement age is by trying to live like one before you achieve your goal. Avoid the temptation of treating annual bonuses or tax refunds as extra spending money by immediately adding them to your retirement fund.
Controlling debt
Total consumer debt in the U.S. is a staggering $3.5 trillionwith credit cards accounting for at least $925.2 billion. The interest rates charged on credit card balances and other consumer debt are usually higher than you could earn on your investments, so make an effort to eliminate debt as quickly as possible.
Making stocks your primary investment option
Historically, the stock market has outperformed other investment options for long-term capital growth. Your 401 (k) retirement plan through your employer and mutual funds offering an investment mix composed primarily of stocks make it easy and convenient to manage the money you are putting away toward your long-term savings goal.
Staying consistent
You may experience roadblocks on the road toward achieving your retirement goal. Unexpected unemployment, serious illness and divorce are only a few of the life-altering events that can have an effect on your finances.
The key to achieving your long-term financial goals is not allowing a setback in February to derail your savings and investment plan for the rest of the year. Short-term setbacks should not deter you from getting back on track with your long-term retirement planning.
If you are interested in learning more about how you can save for the future, contact Bart Zandbergen CFP® at (949) 297-8318 or visit his website.
