The ironic secret is that most people can become millionaires. It’s just that they don’t have the self-discipline to.
For instance, my country’s average wage is $4334 in Singapore dollars. The average savings rate here is 50% of all income, and average income growth is higher than the inflation rate. Let’s say inflation is about 3.22% (the US average inflation rate from 1913-2013)
Let’s say that I’m below average on all counts. I earn only $3334 in income per month. I’m also a poor worker whose income growth is sub-par and only at the rate of inflation. On top of all that, I’m a poor saver and save only 30% of my income.
Finally, I’m also a lazy investor who can’t be bothered to spend more than 10 minutes per year on investing. Hence, I choose to get the average market rate of return by leaving my money in an index fund (in this case, we use one that mimics the S&P Composite Index) and I don’t bother to manage it for the rest of the 40 years. In this case, I get 10.9% average annual returns (average returns of S&P composite over 30 years from 1980-2012). Perhaps I’m really unlucky and this average figure drops by a large amount to become 9% only.
At the end of 40 years, when I’m about 65 (retirement age), I’ll have about $5.8 mn or $1.6 mn after adjusting for inflation. You can see the calculations if you like. They’re here:https://docs.google.com/spreadsheet/ccc?…
S&P Composite Index returns:http://www.measuringworth.com/growth/gro…