The Key to Making Your Next Million Dollars
February 4, 2013
This is a three-part series on how to make your next million dollars. The key to doing this is PLANNING! There needs to be a “savings” line item in your monthly budget. Unfortunately too many investors are not saving much, if anything at all.
- Part 1 of the series discusses the key behavioral trap investors fall into that prohibits them from reaching this milestone.
- Part 2 describes the assumptions you need to consider when calculating how long it is going to take you to get to that next million.
- Part 3 describes the keys to starting on the path to becoming confident in your retirement plan.
So, let’s get started:
PART 1: The Top Behavioral Trap To Reaching Your Next Million
It’s an American tragedy in the making: The majority of Americans admit they are unprepared for retirement. In a survey conducted by EBRI more than half of workers report they have less than $25,000 in savings and investments; and a quarter more report that they have saved less than $1,000. The primary cause can be found in the declining savings rate that has been occurring over the last three decades. The U.S. Department of Commerce reports that the personal savings rate has been declining steadily, from a high of nearly 12% in the mid 1980s to a negative 1.8% in 2009.
Time is your friend in this equation
The real tragedy is that most Americans are in a position to save what they need for the future; yet they simply don’t do it. We are taught to try to save 10% of our income, which in these lean times may be somewhat of stretch for many people. But, the problem for most people is not how much they can save; it’s their attitude about saving: “I’ll start saving next year.”
The #1 behavioral trap to reaching that next million (or first) is procrastination. There’s no bigger dream killer. You may not realize it, but time is your most valuable asset; but it’s a wasting asset if you don’t put it to work for you. Each day you wait to take action, the cost of your financial goals increases. It’s imperative that you set your sights, map out your plan, and take action today.
Anyone Can Become a Millionaire
Who wouldn’t want to be a millionaire? We all have a goal of becoming financially independent at some point in our lives, and while it will probably take more than a million dollars to achieve that, it’s a pretty good start. The fact of the matter is that anyone can save a million dollars, although the longer you have to save, the easier the task. All it requires is discipline, patience and motivation. And yes, it also requires the money to set aside each month. But once you know how much you need to save and how realistic the goal really is, the motivation will come.
If you are already saving for the future, getting to a million dollars will be that much easier because you have established the habit. If you’re starting from scratch, you’re first challenge will be in developing the habit. But, no matter where you are, the absolute key is to start saving early and often. If you can do that it will be very difficult to fail.
Stay tuned for Part 2: How Your Money Grows.