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Who Wants to be a Millionaire?
This article is about simple low risk ways to ensure that you live and eventually retire in the style you deserve. You can work really hard and earn lots of money, but investment, saving and careful, intelligent spending of your money is just as important.
How much money do you need to retire?
Get Rich Slowly
- And some related books
- Get Rich... Slowly
- More Investment Ideas
- The Route to Guaranteed Wealth
- Millionaire
- Expenses that erode wealth
- Buy Gold just in case.
- How Much Money Do You Need To Retire?
- Please Follow Me on Twitter
- Finance Lenses
- Please Leave Some Feedback
- Finance and Investment Lenses
- About Me
And some related books
Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future
Amazon Price: $11.55 (as of 07/06/2009) 
Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)
Amazon Price: $18.45 (as of 07/06/2009)
Get Rich... Slowly
The old joke "The easiest way to end up with a million is to start with 2 million" is of course very true, but it really is easy to become rich(er), it just takes a long time. O.K. It's easy assuming your income more than covers the essential out-goings.People dream of becoming rich by winning the lottery, getting a fantastically well paid job, having an amazing business idea, marrying someone famous etc. but none of these are easy or likely. Also, getting the money is only a small part of the equation. Investing and spending are also very important considerations. Spending money may be fun, but it doesn't make you rich (it just makes other people think you are rich)
Earning a huge salary is a great idea if you can, but there is a limit to the number of hours in the day and to how much you can earn per hour. There is also a lot of competition for those illusive highly paid jobs. Investing in the latest get rich quick scheme may also not really make you rich, although investing gradually over a long term can be very beneficial. The one thing that really will make you richer is spending less.
Here are some investment ideas:
Some Investment Ideas to beat The Credit Crunch
National Savings Premium Bonds
Preference Shares - low risk, high retrurn
Risk reduction with spread betting
More Investment Ideas
The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich
Amazon Price: $13.57 (as of 07/06/2009)
Women & Money: Owning the Power to Control Your Destiny
Amazon Price: $16.47 (as of 07/06/2009)
Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not!
Amazon Price: $10.79 (as of 07/06/2009)
The Total Money Makeover: A Proven Plan for Financial Fitness
Amazon Price: $15.74 (as of 07/06/2009)
Precious Metals Investing For Dummies (For Dummies (Business & Personal Finance))
Amazon Price: $16.49 (as of 07/06/2009)
The Route to Guaranteed Wealth
It's easy, but boring...
The most damaging expenditure is the small habitual items which are easily ignored such as cups of coffee, bottles of water the occasional taxi, magazine subscriptions and Gym membership, but it is easy not to notice the accumulated cost of these things. Here is a way to really guarantee becoming richer... eventually.Here's an example: Bob works in The City (i.e. in London) and takes the train/tube to work each day for 35 years. He buys a newspaper, a cup of coffee and a snack and falls asleep on the train. At work he has 4 more cups of coffee two bottles of water (despite both being available free from the water-cooler and coffee machine) Add a £6 lunch and another drink, snack and Evening newspaper on the way home. None of this seems unreasonable for a wealthy banker, and comes to a total of just £20 a day. That's just £100 a week or nearly £5000 ($10,000) a year. Adjusted for inflation giving up these "luxuries" would save £155,000 over 35 years, in today's money. If you were able to get an investment return of just 5% above inflation on the saved money this would equate to an extra £411,000 (almost a million US dollars) at retirement, just by giving up a few habitual treats. If you add on a couple of pints of beer and a £10 taxi ride each day and an investment return of 10% and you've got an extra £2.3 million ($5 million) at retirement. Just cutting one of those cups of expensive coffee a day could save £88,400
Millionaire
Expenses that erode wealth
You cannot cut out all of the pleasures in life just to retire rich, but some expenses just erode your wealth without really benefiting you, such as the taxi to the expensive gym (why not walk to the gym and home again without going in, and save the cost of the taxi and the gym)
Business air travel is another one of my pet hates. I travelled on business a lot for many years and enjoyed travelling business class (I never paid for it myself though). The business lounge is better than having to pay to sit in a cafe or bar and the extra leg-room is nice. If however you calculate the additional cost per hour of the flight then calculate your net income per hour working, suddendly the flight may seem expensive.
e.g. For someone earning £50,000 a year working 45 hours, commuting for 10 hours with another 10 getting ready and recovering from work, each week the real net income per hour may be just £10 and rather less when you include travel costs etc. A business flight might cost you up to £100 per hour extra and a long-haul flight may equate to hundreds of extra hours spent in the office during your working life. Give up business flights and you can retire young!
New cars are another terrible waste of money. People often refer to a house as being the most expensive thing you will ever buy, but for many people it is really their cars when you take depreciation into consideration. I'm not a huge fan of property as an investment, especially at the moment and property ownership will erode a lot of people's wealth over the short term and especially "buy to let" (i.e. buying property to rent out) investment, but the worst investment of all for many people is their car. At least houses approximately track inflation over the long term. Cars do not. Buying a used or nearly new car avoids a lot of the initial depreciation.
Conclusion:
It's easy to retire rich, or alternatively retire very young, but you have to give up a few of those little pleasure to reap the returns many times over later on. Spend less than you earn and avoid debt. As for how to invest all this extra cash to improve the returns still further that will be the subject of future lenses, but there are also some suggestions:
Some Investment Ideas to beat The Credit Crunch
National Savings Premium Bonds
Preference Shares - low risk, high retrurn
Risk reduction with spread betting
Buy Gold just in case.
A great hedge against economic meltdown.
Fetching new data from eBay now... please stand by
How Much Money Do You Need To Retire?
How much money do you need to stop working?
If you are happy to work until you are 65 then live off an average salary (currently the median income in the UK) of £20,000 a year, then you won't need very much.The best annuity rates are about 7% (at time of writing) and the old age pension is a little under £100 per week, so to achieve "average" pay in retirement would need just £200,000 in a personal pension (or an ISA - Individual Savings Account) and to achieve "minimum wage" (a little over £10,000 per annum working full time) you would need just £70,000. Unfortunately most people actually have rather less than that when they retire. Obviously most of us hope to retire on a lot more than minimum wage.
Theoretically you need less money when you give up work than you do while working: you no longer need to pay for transport to and from work, nor for work clothes, expensive coffee, lunches and after-work drinks etc (see above) and your tax bill may also drop (higher personal tax allowance and possibly a marginal lower tax rate) but you also have more free time and more time to spend your money.
But I want to retire early!
If you want to give up work and live off your money, e.g. trading shares, Spread-betting or just actively investing there are some things to consider, to prevent financial disaster:
What are your minimum outgoings? This is the amount that must be covered before taking any risk with your assets: The costs that must be covered such as bills, food etc. In the 1990s many "Day Traders" went bankrupt because they needed to trade just to cover the bills and during a losing streak they ate into their capital and once you have lost it it is difficult to get it back. If you have bills of £1,000 a month that have to be paid this should come from some reliable source. Index linked government bonds are the only guaranteed way of getting inflation-proof return forever, but pay just 1.5% (plus inflation) so you would need £800,000 invested in index-linked gilts just to cover the bills, before even starting trading shares or Spread-betting
Alternatively, taking a little more risk with a balanced portfolio you could have less than £250,000 invested to cover these essential costs. If you are willing to take on some part-time work or can cover some of this amount from blogging or with your Squidoo or other internet earning then this safety margin can be reduced. You then need to decide how much money you want to earn on top of this minimum risk reducing part of your portfolio and adjust the risk of the remaining part of your portfolio accordingly. Remember that if you lose your money you cannot get it back.
For details about how to earn money on the internet and create a suitably engineered portfolio to meet your requirements please see the related articles:
How to Make Money On Line
Financial Engineering
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Please Leave Some Feedback
ElizabethJeanAllen wrote...
Most people assume building wealth is fast, it'n not. It takes time and effort.
Great lens
Thanks for sharing
Lizzy
Posted July 05, 2009
JaguarJulie wrote...
Yes, I am one of those people dreaming of getting rich by winning the lottery! ;)
Posted June 29, 2009
OhMe wrote...
Never spending more than you earn is good advice and a hard lesson for many to learn. Great lens.
Posted April 27, 2009
Tiddledeewinks wrote...
Sound advice. Check out my "The Prosperity Bible" lens.
Posted March 16, 2009
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Lensmaster AndyPo, aka Andrew Porter, has been a member since July 7 2008, has rated 1,534 lenses, favorited 1,422, and has created 103 lenses from scratch. This member's top-ranked page is "Le Mans 24 Hour Race". See all my lenses
My Bio
Hi, I am Andy. I live in the U.K. but have worked and travelled all over the world. I am a semi-professional wildlife and travel photographer (i.e. I sold a couple of photos once), semi-retired consultant physicist (i.e. unemployed bofin) with a keen interest in finance (i.e. get rich quick..ly):
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