In your thirties? Here’s how to become a millionaire at 65

Becoming a millionaire might be more attainable than you think.

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Key points

• If you invest a portion of your income each month, compound interest can do the heavy lifting.
• Over the past 30 years, the S&P 500 has averaged returns of around 10% per year.
• Find ways to live within your means, whether by reducing your expenses or increasing your income.

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Did you know that there are nearly 25 million millionaires in America? According to a report by Credit Suisse, the United States is home to more millionaires than any other country in the world. In fact, there might be one living on your street. Most millionaires don’t drive flashy cars or live in expensive homes. Many have built their wealth by living modest lives and constantly investing their money.

How to become a millionaire at 65

If you’re in your 30s, retirement probably seems a long way off. The desire to enjoy your money now rather than setting it aside for your old age is understandable. But as we’ll see, the more money you can invest in your thirties, the longer it takes for it to accumulate in value. Time in the market is a powerful thing.

Here are four steps to take if you want to become a millionaire within the next 30 years.

1. Understand the difference between saving and investing

The words economy and invest are sometimes used interchangeably, but there is a big difference between them when it comes to building wealth. The money in your savings account will only earn a small amount of interest. It’s a good place to keep your emergency fund and other cash you might need to access quickly, but it won’t net you millions.

In contrast, investing involves buying assets that will generate returns, such as buying stocks or bonds. Over the past 30 years, the S&P 500 has averaged returns of around 10% per year. Unfortunately, this is just an average – there will be years when stocks lose value. But if you only invest money you don’t need in the short term, you can wait out the bad years and enjoy the good ones.

If you have access to a tax-efficient account such as a 401(k) at work, try to maximize your contributions. If your employer matches some of the money you invest, make the most of what is essentially free money. You don’t have to choose individual stocks. Instead, see if you can build a diversified portfolio using index funds or ETFs that give you exposure to a mix of stocks.

2. Let compound interest do the heavy lifting

Compound interest is basically what happens when you earn interest on your interest. For example, if you invest $1,000 and it earns an average of 8% interest per year, you will earn $80 in interest in the first year. If you leave that money alone, the next year you’ll earn interest on $1,080 — your original $1,000 more the additional $80.

Let’s say you’re 35 now and you already have $10,000 in investments. If we assume an 8% return, the table below shows how much you could have at age 65, depending on how much you invest.

These calculations are very simplified – they do not take inflation into account and there is no guarantee of a constant 8% return. Still, it shows how compound interest and time can work in your favor. Even if you do nothing, that $10,000 could have increased tenfold by the time you turn 65.

3. Live within your means

You might be looking at the table above and thinking, “Where can I find $750 a month? My salary barely covers my expenses! If so, you are not alone. More than 50% of Americans live paycheck to paycheck, and soaring living costs have put even more pressure on people’s bank accounts.

Spending less than you earn and investing the rest is an essential aspect of building wealth. If you’re not sure how to do this, start by determining where your money is going. You can do this by looking at your bank statements or by using a budgeting app. Once you have a clear idea of ​​what you’re spending, see if there are any areas where you could reduce your spending. Do you have monthly subscriptions that you no longer use? Are there ways to reduce your grocery spending?

If you don’t want or can’t make discounts, there may be ways to increase your earnings. This might involve asking for a raise at work or looking for a side hustle to give you some extra money. If you can make more money, try not to give in to the temptation to spend more. Instead, put that money directly into your investment account.

4. Don’t take on high-interest debt

If you have high interest debt, compound interest will work against you. Instead of creating wealth, you will actually Pay interest on your interest. This can snowball the amount you owe and that is why credit card debt is a big enemy if you want to become a millionaire.

If you have high interest debt, plan how you will pay it off. Figure out how much you could reasonably repay each month and what balance you plan to pay off first. Once you have a plan, taking the first step becomes more manageable.

Becoming a Millionaire Might Be More Achievable Than It Seems

It all depends on your financial situation, but building wealth might be more attainable than you think. If you’re in your 30s and want to become a millionaire, research sustainable ways to invest money each month. If you don’t feel like you can save $100 a month, start with $50 and see where that takes you. The important thing is to start. Once investing becomes a habit, you may be well on your way to millionaire status.