Invest Like a Millionaire

There are ways to ensure you have the money you need in the long term to finance your retirement or other activities. Shutterstock

Protecting your financial future is imperative. Even having enough money to enjoy life in your retirement is a financial goal many strive for. One way to do that is to become a millionaire.

It’s easier said than done—or is it? There are ways to ensure you have the money you need in the long term to finance your retirement or other activities. It just takes investing like a millionaire.

Start Saving Immediately

There are 22 million millionaires in the United States, according to Forbes. One of those could be you. But you don’t have a shot at it if you don’t start saving early. Build your savings and take advantage of compounding. That’s when you make money off your interest over the years.

If you wait 10 years, you could miss out on thousands of dollars. For example, if at 20 years old you start contributing $6,000 per year into an individual retirement account (IRA) for 40 years, your total amount would be $240,000. And that’s not counting the interest you’ll earn. It probably will be much more.

Let’s say you can’t afford $500 a month in the beginning. If you consistently contribute, you could still end up with a large nest egg.

Develop a Long-Term Plan

Millionaires know that accumulating wealth is not a short-term endeavor but a disciplined process that takes decades.

Outline specific objectives like:

• retirement funding
• purchasing property
• securing education.

By doing this, you can create a focused plan that guides your financial decisions.

Leverage the power of compounded investment earnings. By doing this, millionaires allow investment earnings to generate more earnings. This creates a cumulative effect of reinvestment dividends and interest throughout the years.

Invest in Index Funds

Think of index funds as buckets of diversified assets. They can be a mixture of stocks and bonds. Some of the biggest index funds track the S&P 500 Index. This is probably the world’s most popular stock index. The S&P 500 includes stocks across 11 sectors of the economy.

Some of these companies are:

• Berkshire Hathaway
• Microsoft
• Apple
• Amazon
• Eli Lily &Co.
• (the entire list here)

Over the years, the S&P 500 has had annual average returns of about 10 percent. It’s a long-term investment, but because it’s diversified, it is considered safer than many individual stocks.

Noted investor Warren Buffett, for example, recommends that individual investors buy shares of an S&P 500 index fund and hold through thick and thin.

But remember, all investments come with some risk. Don’t invest what you can’t afford to lose.

Avoid Spending and Debt

Don’t buy things you don’t need. And never use a high-interest credit card for purchases you can’t pay off within a month or two.

Don’t chase credit card rewards. You'll just eat them up with the high interest you’re paying, and they won’t be worth anything.

Remember, every dollar you don’t spend is one more dollar saved, and that'll make you money.

If you avoid the unnecessary expenses and invest $50 per week, you’ll have $104,000. And that’s not counting the interest and compounded interest.

It’s the first step toward millionaire status.

Invest When Everyone Is Afraid

Stay on course. Market downturns can present valuable opportunities. The adage “buy low, sell high” is a sound course of action.

Avoid letting emotions drive you to sell during market turbulence. You can use the opportunity to buy at discounts because others are selling.

Remember your long-term goal. This is critical during the times other fear and it seems to be going south fast.

Focus on the big picture and avoid panic-selling. Strengthen your portfolio instead.

Don’t Keep Up With the Joneses

You don’t need to look like a millionaire to be a millionaire. What a millionaire seems like in your head is not a reality. Buffett has lived in the same modest house in Omaha for nearly 70 years. He originally paid $31,500 for the home when he was 28. He didn’t worry about keeping up with the Joneses as his wealth grew.

Avoid giving into lifestyle inflation. That’s when you spend more money because you make more money. So besides buying the large house you don’t need, when you earn that raise, stay in your modest home if you can.

And don’t be lured in by the flashy car or expensive designer clothes. Instead, put your money toward your future.

Set Up Automatic Investments

Investing shouldn’t be an afterthought. Set up automatic weekly or monthly contributions to your brokerage.

That will put your investing on autopilot, and you won’t run the risk of neglecting your investments. You also won’t be tempted to spend that money since it’s gone before you realize you have it.

You’ll also be able to benefit from dollar-cost averaging. This means you’ll be buying funds regardless of how the market performs. This will help smooth your average purchase price. A 401(k) is an example of dollar-cost averaging.

Experts recommend investing about 10–20 percent of your income. But try to set up an automatic contribution that you can afford. Increase it as your salary increases.

Go for Help on Your Journey to Wealth

You don’t have to go it alone. The best course of action to help you implement these concepts is to consult with a financial advisor. Millionaires call in experts.

When hiring a financial advisor, ensure that you work with a fiduciary. These advisors are ethically obliged to act in your best interest, not their firms’.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.