Jan 29

Jan 29 Everyone can be a multimillionaire, here's how!

Getting rich is a choice, not a chance.

Do you want to be rich or struggle with money?

But saving money is hard! I'm not talking about putting $1,000 into your checking account. I'm talking about socking away money for long-term wealth. Curiously, it's technically not hard to save money, but for most, the difficulty is on par with exercising every day, consistently eating well, and being kind to the opposite political party.

Saving money for the future is a psychologic challenge and goes against our nature.

Google “rich people,” and you’ll notice that most are “older”. Most people are unaware that Warren Buffet built 90% of his wealth after 60. At 47 years old, he had a poultry $47 million, as of 2023, he has $112 billion

This is precisely why saving money is so complex because it's in the future or the unknown. It doesn't feel like you get anything for it. Buy a nice car, and you get to drive it. Go on a nice vacation, and your get to swim in the ocean. Spend a weekend in Vegas, and you suffer from a pounding headache in the morning. All of these experiences give real-time feedback and reward.

Saving money over an extended period of time requires much less sacrifice to lifestyle.

The key to getting wealthy is time. If you don't use time, you can't get wealthy or said another way, time is the only path to wealth. Sure, some people hit it big by inventing something, becoming famous, or selling a company, but it's a very small number of people. Very close to zero, and I recommend you consider that probability zero in your get-rich scheme. The mathematical secret to building wealth is called compound interest. The way you get to take advantage of this "secret magic math" is to save money monthly…… for an extended period of time.

The magic math is your path to wealth - What is compound interest?

Imagine you're 65 years old, and you had a similar career as most of your friends. It had its ups and downs, and you and your friends all worked hard and increased your salaries over time. But on your 65th birthday, you announce quitting work, buying a yacht, and traveling the world for the next five years. Your friends are confused. Did you get an inheritance? Did you win the lottery? No, you saved money on the side during your lifetime and used the secret magic math. They didn't and still have to work.

The secret magic math

Here's how compound interest works. Let's say you save $1,000 and make a 10% yearly return. You now have $1100. Then the following year's 10% return is calculated at $1100, not $1000, so you now have $1210. You get 10% on the 10% return or interest on the interest. This process repeats, and if it repeats for decades, congrats, you're rich! For example, if you let $100,000 grow at 10% for 30 years, you'll have $1,983,740.

We all don't have $100,000 for 30 years, so let me give you the formula for $3,000,000.

Drew's 20/20 Plan

It guarantees minimal impact on your lifestyle and gets you rich.

Assume you’ll be saving roughly 10-15% of your pretax income.

First 20 years: Save $400 per month from 25-45 years old. That gives you $303,748.
Second 20 years: Let the $303,748 ride and add $1,500 monthly from 45-65 years old.
Where to keep the money? Create a Charles Schwab or Vanguard account and invest monthly money in a low-cost “all market” index fund, like VIG. (This article gives more details, read now)
That's it, 20/20.
Congratulations. You have $3,364,938!

Let's talk about saving money. It's hard, especially when you're younger. But getting older doesn't guarantee saving either. I know many "older" people who still struggle to save. It may feel like there's no money left to save, I get it, I've been there and had a long savings journey myself. In fact, before I was 28, I saved a lot of money twice and ended up losing it all. (thanks, early internet stocks!). But what I built was the habit of saving, and I never gave up. I did it. I'm "older" now and proved the "magic math" works.

Saving is a discipline and a habit; it can be learned, and few other things are as valuable. But the idea that you don't have enough money to save or don't have any "leftover" is flawed in two ways and is the main thing that keeps most people from becoming wealthy.

First, most people can give up something that would have minimal effect on their lives to save $250 or $500 a month. And secondly and more importantly, the premise that you don't have money left over each month to save has the flow and priority of money backward. If you save at the beginning of the month (or first), you won't have enough money to go out to eat and buy that new toy or clothes. If you reorder the flow of money, you get to be rich.

If you wait until you’re 50 to save, it's too late. If you wait until you are 40 to save, it's not too late, but it's much more challenging and requires much more sacrifice.