When it comes to getting rich, people have the wrong idea about what it takes. Lots of people think that you have to win the lottery or start with a whole lot of money. The truth is that getting rich is all about the small choices that you make on a daily basis. I am not going to throw out ideas like skipping the daily coffee and bringing your luck to work. Those have been done to death. Instead let’s focus on a few things that you can do with small amounts of money to start building wealth.
How To Get Rich Using Small Amounts Of Money
It may take $500 to $1,000 to open a brokerage account but it doesn’t take anywhere near that much to start investing. You can invest in a number of different stocks using a direct stock purchase plan for as little as $25. Anyone can come up with $25 because it is an incredibly small amount of money.
Look at it this way:
$25 a month is approximately 83 cents per day. Just round it to $1 a day and invest $30 each month in a stock.
Start with $30 and invest $360 a year ($30/monthly) in a company that is growing at a modest 7% rate over 20 years. At the end of 20 years, you will have $15,907.55. If you can boost that return to 10%, you would have $22,882.72 at the end of 20 years. That’s not bad for $1 a day. This is a plan that anyone can follow.
If you are looking for more appreciation you can bump up your contribution amount.
Start with $100 and invest $3,600 a year ($300/month). That equates to $10 a day. If you averaged a 7% return on investment, you would have $158,301.60 at the end of 20 years. Bump that rate up to 10% and you would have $227,481.25. You wouldn’t be rich but would have a decent amount of savings to work with.
Now let’s assume you are trying to get rich.
Start with $1,000 and invest $9,000 a year ($750/month). You would need to save $25 a day. A 7% investment return over 20 years would net you$398,656.28. A 10% return on investment would give you $573,749.99. The average person would be pretty happy to accumulate under $600,000 just from their own personal investing.
A 30 year old person could be worth over half a million dollars before the age of 50.
Remember that it is very possible for you to exceed the amounts that I listed. A 7% average annual return on investment is very reasonable and a 10% average annual return is realistic. If you invested in the right companies, you could beat the amount of projections that I have selected. For example, companies like Nike and McDonald’s have beat the returns that I assume above. Small cap stocks could do even better,
You could also increase the initial investment amount or increase the monthly investment amount to increase your final balance. Increasing the number of years that you invest for is another way to grow your investment capital.
The point of this post is to show you the power that small amounts of money can make on your long term portfolio growth. (For more information read How To Get Rich Without Leaving Your Home).