The Wealth Formula

Anyone can be a millionaire and here's the proof.

You too, can be a millionaire. One of the most basic principles is understanding the wealth formula. If you want to be rich, it really breaks down to 3 things.
1) How much money you start with,
2) The return or interest rate you accept
3) The amount of time you wait.

The more you increase the first two factors the more you decrease the third factor. Most of us are limited in the amount of dollars we can start with but the return from your investment is really a function of what you expect. It is in your head. If you really want to become wealthy you need to change your expectations.

Double your money
If you could double your money every year, let me prove to you that you don’t need a lot of money to become a millionaire - you just have to adjust your expectations. The chart below is quite simple. It shows you that if you started with $1.85 and doubled it every year you would be a millionaire in 19 years.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

$1,000,000    (1)$500,000    (2)$250,000 (3)$125,000

(4)$62,500    (5)$31,250       (6)$15,125    (7)$7,562.50

(8)$3,781.75   (9)$1,890.63   (10)$945.31 (11)$472.65

(12)$236.33   (13)$118.16    (14)$59.08    (15)$29.54

(16)$14.77      (17)$7.39       (18)$3.62      (19)$1.85

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

What if you wanted to be a millionaire in lets say 10 years? If you started with only $945.31, and could double your money every year you could do it, you could become a millionaire in 10 years.

The Rule of 72.
If you knew your rate of interest and divided it into 72 this will give you the number of years it will take to double your money. For example if you had my money in the bank at 6% interest it will take (72/6)or 12 years.

The rule of 72 works in reverse too, if you wanted to know what interest you need to get to double your money in 3 years, simply divide that number into 72. 72/3 is 24%

Prove to yourself that you too can be rich

If you doubled your $ lets say every 4 years your interest rate would be (72/4=18%)18%. If you started with $1.85 how long would it take to make a $ million. Take the number in brackets besides $1.85 (in the chart above)and multiply by 4(19x4=72.)This is the number of years it will take you to become a millionaire earning 18%, starting with only $1.85. Have I got your attention? But who wants to wait 72 years?

What if you started with just under $2000 how long would it take? Lets go through the same process. Looking at the chart above the closest figure to $2000 is $1890.63. The chart tells us that doubling your $1890.63 every year (or earning 72% interest each year) it would take 9 years to earn a million. At 18% interest (72/18=4)it will take you 4 times as long or 36 years (9x4=36). But who wants to wait that long.

Try doubling your $ every 3 years (72/3=24%). That's a 24% return on your money. Starting with $1.85 you can be a millionaire in 19x3 or 57 years. However if you started with started with just under $2000 it would only take you 9x3 or 27 years. Still too long? Yes but with a little bit of foresight, early in life you can set yourself or your children or grandchildren up very nicely using the power of compound interest. It doesn't take a lot of money to get started, all it takes is a committment to do it.

The point I am trying to make is that
1) it is possible to become a millionaire and
2) how fast you do it is really a factor of two things the amount of money you start with and the rate of interest you receive. Lets get realistic if you want to become a millionaire you have to change your expectations - the amount of interest you receive now doesn't cut it anymore. You need to develop a millionaire mentality.

What return on my investment should I expect?

Look at the chart. The number in brackets tells you the number of years it will take you to become a millionaire depending at what dollar value you start with -if you doubled your money every year (earning 72%). If you had $15,125 it would take only 6 years to turn into 1 million.

Doubling your money every five years instead of every year means it will take you 5x as long or 30 years. Let me just say this - anything less than 12% is fostering a poverty mentality. Your money has to work hard for you if you want the freedom to do what you want whenever you want to do it.

The question you must ask yourself is how do I get a better return for my time and money? Let's look at how traditionally you could get greater than 20% return on your investments. Go to 3 Ways to Wealth.

Next!