Investing: How a medium income can turn you into a millionaire

Whenever I talk to people about saving and investing, quite a number seem to think becoming a millionaire on a modest income is mission impossible. What I realize is a lot of skepticism, people not wanting to manage their finances, some wanting to spend all their money, some just do not want to think it’s possible. In today’s article, I will dedicate a bit of time to show you that it can be done. As I have said in the past, our only obstacle to financial success is our spending habits and our mindset. A lot of people seem to have given up and seem to live life as it comes. We seem to think that millionaires are people who make a lot of money (income); we don’t seem to realize that with a well organized savings and investment plan it can be done. The biggest thing stopping people from becoming millionaires is their spending. When people make higher income, unfortunately that also means higher spending. Imagine when you were in university or college, we were able to navigate through school, and enjoy ourselves with several fun activities while making zero income. I have talked about a variety of investment options that we have in place, and my analysis will be based on the assumption that you have read that article. In order to realize our goals, and in all honesty to get to a million on a modest income, investing in the stock market is essential. I have been investing in mutual funds in the last couple of years, and even though the market has been volatile, an average return has been about 7.7%, which is more than you would get in a traditional savings account. I will use this rate as the basis of my calculation, even though I do know that the average rate of return from the stock market is higher than that in the long term. One of the key strategies to attaining that million is to keep the monthly spending to an absolute minimum. By this I do not mean cutting out things you enjoy completely. But finding cheaper alternatives or strategies to save money on the things you need to buy or do, as I indicated in my prior article. For example before you get insurance on your car or house each year, shop around. If you constantly make your bill payments on time, negotiate with your cable and phone bills to give you the best rates going or any special offers in place. If you use your credit card for shopping, use cash back credit cards, buy a pre owned car instead of a brand new and if you doing groceries shop smart by comparing the prices in the stores or even the free flyers that go round. All this savings will eventually add up, especially if you can do it constantly for several years as you continue to invest and manage your money. It will open up a huge junk of cash flow that you can use to pay down good debt (mortgage) and investing in the stock market and real estate. (See prior articles). Below is an example of how one can come up with a million through investing; Supposing you plan to retire at the age of 65(which is the retirement age in Canada) and you decided to invest $1000 today, thereafter for each month you invested $400 of your income, assuming you get a return of 7.7%. Then your money will look like this: If you start of at age 25, by the time you are 65; you will have $1,310, 513.11. If you started at age 30, by the time you will be 65; you will have $872, 841.71 Am sure most young people spend $400 or so in a month for consumer goods/services and are capable of saving more than I calculated. It’s the spending part that is the key to how much your net worth will be at retirement.I don’t judge anyone for their financial choices. Everyone has their life, and it’s your money to do as you wish. Too often, people choose to think about the present self as opposed to the future self, consoling themselves that life is short, not realizing that when you retire, your life will become long if you didn't plan ahead, and that’s why I continue to advice, start saving and investing because no one will do it for you.