Starting your journey to becoming a millionaire

So, I want to show you how someone, at the age of 22 just starting out, can become a millionaire before they are 60 years old.

So we take an example of someone graduating from university or finishing an apprenticeship, as they settle into a new career at age 22 they are able to regularly save £100 into the stock market every month. If you are unsure if you can afford to save that amount take a look at our  Guide to Managing your Money in your 20s and 30s. For this example I have assumed that as someone’s salary increases they choose to spend some of that money on increasing their savings contributions so every 5 years this person increases their regular monthly contributions to the stock market by £100.

Next, I needed to assume an average annual growth rate for the chosen investment. Now, your average annual growth rate will largely depend on how much risk you’re willing to take with your investment money. It is also important to know that the stock market doesn’t just go up in a straight line over time, there will be volatility along the way and there will be good years and bad years. However, we can take all those good years and bad years together, to get the annualised average growth rate, and we can use past data for this. Let’s assume that this person invested in the S&P 500, which is a collection of the 500 largest publicly-listed companies in the US. From 1957, when all 500 companies were incorporated into this index, to December 31^st, 2022, the average annualised return in the S&P 500 was 10.13%. This assumes that all dividends received were reinvested. Whilst past performance can’t accurately predict what will happen in the future, I have used this average annualised growth rate of 10.13% in my calculation.

That is the really geeky bit so if you are feeling lost stick with me, I just like to explain how I came about my calculations. So now for the interesting part, this would leave that person with £1,080,956.94 invested by the time they turn age 59. The best part is that person only would have invested £187,200 in total. Compound growth did the rest of the work!

Now your journey will be unique, you might be in your 30s and 40s, you might have built up some wealth, you might not have anything at all. This is just an example to inspire young people to save more and realise they can control their destiny to some extent. But this is where tailored financial advice can become your secret weapon. This is what I love and am so passionate about, taking someone and all their ideas and dreams and turning it in to a reality with a solid well-thought through plan that can adapt and mould around life’s difficulties and trials and tribulations. So, if you are older, don’t be put off, it is never too late to get started, you might just have to work a bit harder, but you know what you won’t have to work as hard as someone who does nothing at all.

What is your definition of retirement? Dull and boring or freedom to do what you want?

You now have a pot of money that, in theory, should last you for the rest of your life and you can withdraw from this pot for whatever you want. My definition of retirement is having the financial freedom to do whatever I want, whenever I want. I could fully stop work at this point and become a full-time traveller. Or more likely, I could use this financial freedom to start up something new, turning a side hobby or a passion into a fun retirement business. “Retirement” for me then starts to feel like something that’s exciting to work towards, rather than something that feels a along way away, that’s dull and boring. Depending on the amount that I’m prepared to invest each month, and the investment risk that I’m willing to take, retirement and financial freedom could happen for me sooner than when I am in my 50s or 60s. The sooner I get the power of compound growth working for my clients the better.

Investing is scary - we get it

Look we get it, investing is scary. It can be common to bury your head in the sand, choosing to avoid doing anything with your finances at all but building a financial plan of longevity will make you more resilient throughout life and more prepared for the hurdles ahead. Plus you can still plan for the future whilst living for today, we advocate for that massively.  When we all start thinking about managing our money we don’t understand how to manage the risk or our own emotions around investing. Some people start off using robo-investment platforms or investing themselves without advice, also known as DIY investing. This is because a lot of people can’t find a financial adviser that represents them and our industry gives off this perception that you have to be rich and wealthy to need a financial adviser. Well you don’t, actually the cost of financial advice is more affordable than what people realise. At Unividual financial advice isn’t just for the rich and famous it is for all of us. So, if you are intrigued to get started take a look at some of our resources below or feel free to get in touch to find out more.

Whether you are just starting off in your life and want to build your millions or you have already saved up throughout your lifetime and want to drawdown income I am here to support you with your next steps. We can start off having a coffee, get on a video call or if you want to get started we can arrange a free first meeting, where we can talk about what financial freedom means to you, and how Chartered Financial Planning can help you get there.

In the mean time just remember you can save and still enjoy today, do a bit of both, and if you have questions you know where I am!