I want to be a millionaire. That probably strikes you as pretty obvious; most of you probably want to be millionaires, as well (and the ones who don’t probably are shooting to be billionaires). But it’s one thing to want to be a millionaire, and something else entirely to actively work and strive toward making that dream into a reality. So let’s change that first sentence up a bit; I WILL be a millionaire.
Luckily, there’s plenty I can do now to help my progress along the way, and plenty of support to be found with other personal finance bloggers (among others). One possible source of encouragement is by joining with like-minded individuals to work towards a common goal (in this case, having a high net worth). J. Money, the author of Budgets are Sexy (which is a great blog name, by the way) has set up a Million Dollar Club, for those of us who have the goal of a million dollar net worth. All you have to do to join is write a of list of everything you are going to do in order to reach your million dollar goal. So, here it goes…
In Order to Become a Millionaire, I, Roger the Amateur Financier, will:
1) Max out my Roth IRA every year: Not a bad way to start, an IRA allows me to control my investing, as well as gaining tax advantages. With a Roth (as opposed to a traditional IRA), I never need to pay income tax on my investment earnings, as I am using post-tax dollars. All in all, a pretty sweet deal.
Status: On track to max out my contributions this year, and once I have a new job next year, I will be able to make this goal easily. (That’s the power of positive thinking in action, boys and girls.)
2) Contribute 10% of my gross pay or up to the maximum match (whichever is more) to my 401(k): I hedged here, because different corporations give different amounts of matching funds to their employees. If my future employer provides a match, I’m going to do whatever I can to maximize the matched amount, including cutting back on my spending so I contribute more. If they don’t provide a match, or only match the first little bit of my contribution, I’ll still contribute at least 10% to make sure that my 401(k) continues to grow.
Status: Currently on hold, until I obtain a new job that offers a 401(k) plan. Don’t worry, it’ll be one of my top priorities when I get hired.
3) Add $100 per month to my savings: A few reasons for this one. First, it will help to boost up my emergency fund in case I find myself unemployed again in the future. (Or if *knock on wood* it takes significantly longer than I expect to find a new job or other source of income.) Second, it’ll help to provide seed money for any entrepreneurial ventures I attempt to enact in the future. Third, if I can keep this up for several decades, I’ll have a substantial cash cushion when I approach retirement, which can easily be folded into my post-retirement asset draw down plan. As they say, cash is king!
Status: A combination of losing my job, moving in with my fiancée, and the holiday season has done a number on my savings. One of my first priorities is to build them back, and then work steadily to bulk them up.
4) Cut discretionary spending down to $500 per month: Speaking of the holidays, I’ve let present buying and decoration spending get the better of me these past few months, and I NEED to get it under control. By setting a reasonable, ‘low, but not TOO low’ target, I hope I can help to motivate myself to cut my spending significantly in 2010.
Status: Well, given that Christmas is still a week away, I have more presents to buy, and I’m already well over this goal, it’s not going to happen this month. But starting in January, I’m going to do everything in my power to keep my discretionary spending to a minimum (while still not depriving my fiancée or myself, of course).
5) Add $50 per month to non-retirement investments: Particularly while I’m still between jobs and don’t have access to a 401(k), I need to look outside the retirement account box and invest in taxable investments. The amount might seem fairly low, but given time and the power of compound interest, it can develop into something quite impressive. Ah, compound interest, I do love you so.
Status: I’ve actually managed to develop a small taxable portfolio, with several different types of investments. I’ll have to keep bulking them up, and perhaps looking into other types of investments to maximize my portfolio.
6) Keep developing alternative sources of income: If nothing else, the long and all too frequent periods I’ve found myself unemployed this past year have shown me that having more than one source of money in my life would be a good thing. I’ll have to keep working and trying to develop some alternative sources of income which, even if they don’t allow me to retire at thirty, will help put spending money in my pockets and investments in my portfolio.
Status: Well, you’re currently reading my big possible source of alternate income for 2009. I’m going to keep working on my blog (especially now as I seem to be picking up steam), of course, but in 2010 (as well as what little remains of 2009), I’m going to be sure to cast my eyes about for some other potential sources of money. I’ll be sure to let you know about them as they develop!
That’s about it for now. I’m not going to plug these numbers into a retirement calculator as J. Money did, partially because so many of them are rather amorphous (how much I contribute to a 401(k) being a big one, along with sources of alternative income), and partially because I’m not sure I want to see the results from where I stand now. Rest assured, though, one of my goals in life is to retire sooner (much, MUCH sooner) than 65, with no worries that I’ll outlive my money or have a lackluster retirement. Which means… lots of saving, lots of investing, and plenty of money making along the way!