The $20 Millionaire

Sock away $20 a day, every day, and you’ll very likely wind up a millionaire.

Stuffing it under your mattress would give you a million bucks … in more than 135 years. Not a very efficient plan.

Ten-year Treasury notes recently offered a 4.58% yield. Investing your daily $20 in those bonds instead of your mattress would get you to millionaire status in just more than 43 years. Not bad.

The stock market has historically returned an average of approximately 10% to 11% annually. If that keeps up, investing in a low-cost market index tracker like Vanguard’s Total Stock Market Index (VTSMX) will get you to a million in roughly 26 years.

It gets interesting, though, if you’re investing using a strategy that has a legitimate chance to beat the market. If, over the long haul, you outpaced Wall Street’s averages by a mere two percentage points a year, a million bucks would be yours in less than 24 years.

Warren Buffett began investing his investing career when he was 19 with a mere $10,000. He was a millionaire by 32, and landed on the Forbes 400 with $620 Million in 1979 at the age of 49.

The Fine Print
20 bucks a year comes out to about $7,300 a year. But hey, no one said becoming a self-made millionaire was easy! Of course if you would want to keep up with inflation that $20 would have to be increased by the inflation rate. A good way to configure this would be by putting aside the amount you’d probably end up paying for lunch in a modest-priced restaurant. In regard to Buffett he made a large portion of his capital managing money in a fund he started when he was 26, while at the same time compounding his net worth by over 21% a year on average.

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