Retire as a Millionaire
Do you want to retire as a millionaire? Reaching that goal may sound like a far-off dream but it’s more attainable than you might think. While not always easy, following these eight steps can go a long way to helping you make that dream a reality.
Step one is to create a plan. No matter how little or how much money you have to invest right now, a financial plan is key to reaching your goals and will be the roadmap to achieving all of the other steps outlined below.
Step two, start saving money now. Even if it’s just $25 per month at the start, the earlier you can get the ball rolling the better. You’ll be surprised to see that you don’t notice the money gone when it’s automatically deducted from your bank account each month and will be a lot more eager to up the monthly contribution amount once you see your investment account start to grow.
Step three is to watch your spending. Make sure to live within your means and don’t spend too much on your house, cars and vacations. Sure, your monthly salary can afford the high mortgage or car payment now but what about your savings? Make it a top priority to put a portion of your earnings (the amount is calculated in your plan from step one above) into long term savings each paycheque.
Step four is to take full advantage of any benefits and plans that can give your retirement a boost. Use the TFSA and RRSP programs for their tax savings benefits and take full advantage of any employer matching investment opportunities. When your employer is willing to match 100 per cent of what you put in, there may be times when it’s appropriate to take on slightly more debt to make the full contribution amount.
Step five requires you to increase the amount you save each month or year as you get older. Most people will see an increase in their employment income over time and you should make sure to increase how much you put away accordingly.
Step six is to create a proper asset allocation plan and stick to it. When you’re young, your portfolio should hold mostly quality equities and you should avoid holding too many fixed income vehicles for your long-term investments. Don’t get too worried about the short-term volatility of the stock markets as long as you have a well managed portfolio in place. Yes, the markets will take some dips over time but taking a (moderately) aggressive stance will likely provide much greater returns in the long run.
Step seven is to protect your retirement plans. Be sure to create an “emergency fund” so that you have a few months worth of expenses set aside in case something happens. You should also have appropriate disability and critical illness insurance in case a major injury or illness takes place as an event like this can completely derail your plans if you’re not prepared.
And finally, step eight is to be patient and not get greedy. You will no doubt hear of many “get rich quick” opportunities over your lifespan but remember that if it was really that easy, everyone would be doing it. Most of these schemes (scams) will only leave you further behind and many could cause you to lose everything. Stick to your retirement plan and don’t get greedy.
The key to building a million dollar retirement portfolio is compound interest and the sooner you start putting money away, the longer it will have to compound and grow. Nobody plans to fail but plenty of people fail to plan. Create your own plan today and follow the above steps to realize your dream of retiring as a millionaire.