Tuesday, 29 April 2008
In 2009, Start Savings $2,300 Per Fortnight
What do I have to do to be a millionaire by 35?
Right now I am 24. My net worth is currently $31,560. At the moment I am reasonably certain that I am capable of investing $1,000 per month. There are about 8 months left in 2008 so by the end of this year I should have a net worth of $39,560 (assuming the investment doesn't produce any returns).
By 2009 I will be 25, which means I will have 10 years to become a millionaire. How much will I have to invest per fortnight to become a millionaire? To figure this out I went to St. George Bank's savings calculator and found out that assuming my investments give me 8 per cent per year I should aim to invest $2,300 per fortnight.
This is why I need to have two jobs next year! Currently I am able to save $500 per fortnight fairly easily but by next year I must ramp up my savings. I will need to quadruple it. It will be a lot easier if I didn't have to go to university, which is what I have to do now. University really is holding me back from working longer hours.
I get paid $18.30 per hour. I am told that people who work at McDonald's get paid more than I do. They get paid about $20 per hour. Anyway, let's assume that I am only capable of getting jobs that pay me $18.30 per hour. If I want to save $2,300 per fortnight I will need to work 126 hours per fortnight (2300/18.30), which is 63 hours per week (rounded off). This doesn't seem too difficult. I have heard of investment bankers who work 100 hours a week, yet I can work only 63 hours a week in low-paying jobs, and if I do this for 10 years in a row then I will be a millionaire by the end of those ten years. If I had started this earlier, say, in my teens, I would have been a millionaire now, but of course then I'd have to abandon high school and university. It's only when you've made calculations like these do you realize just how massive an opportunity cost university education really is.
Anyway, the whole point of this post is to show that being a millionaire is not hard. It just involves finding a job (any job) and then doing as many hour per week as you can. Then it involves being thrifty and investing as much as possible.