Every New Year, people make resolutions. It’s an excellent way to give yourself the direction and goals you need to help you become a better person. So for 2020, we hope you have decided on some good personal and financial goals, especially millennials.
All of you are somewhere at the critical first decade of your work life. It’s an age at which people have plenty of energy, a realistic perspective of life, and yet, they can be overly ambitious.
So if one of your dreams is to become a millionaire before you hit your 70s, there are two things you can do to expedite your accumulation of wealth.
Spend less and save more
The more you can save, the more you can contribute to your equation of compounding that’s going to take you to the glorious number of $1,000,000. There are two simple ways to save more: Higher income and lower spending. I am going to talk about the second one today.
Though spending less usually means reducing your extra expenses and sticking to essentials and necessities, a lot of saving can happen there as well. Take a good hard look at your necessary monthly expenditures: Your rent/mortgage, groceries, utilities, transportation, and other living expenses.
You can start with the rent or mortgage. If you’re renting, shop around for a better deal, even it’s a bit farther away from your work than you would like. If it doesn’t significantly impact your commuting cost, even a $100 reduction a month can make a difference.
When it comes to mortgage, always be on the lookout for better interest rates. If you can renew your mortgage on more favorable terms, whatever monthly amount you have saved because of your new mortgage can go towards your savings.
If you frequently eat out or get food delivered, change this habit and try eating at home as much as you can. On average, if you stop eating lunch at a restaurant every working day and opt for bringing food from home instead, you can easily save as much as $150.
Save on utilities by switching to energy-efficient appliances, and picking up some green habits. You can switch to a cheaper phone plan if the current one is overkill per your needs. If it’s possible, taking public transport to and from work can save you a lot of money on gas.
Invest early and invest well
It’s a smart idea to split your investment portfolio between longstanding dividend stocks that help grow your wealth over time, and growth stocks that can catapult your capital growth.
One such stock is Shopify (TSX:SHOP)(NYSE:SHOP), Canada’s sweetheart tech stock, and it’s easy to see the root of this infatuation.
In the past five years, Shopify has grown well over 1500% in market value. Last year’s growth has been an explosive 183%. If we consider the compounded annual growth rate of Shopify, it’s an astounding number of 74.23% for the past five years.
If you invest less than half of your fully stocked TFSA, $30,000 in Shopify, and it keeps up a CAGR of say, 50% (far lower than its current CAGR), your initial investment may be worth well over a million in 9 years.
If you don’t pull out your investment and let it grow, and Shopify keeps up its incredible growth pace, the power of compounding will do wonders for your wealth.
Foolish takeaway
Becoming a millionaire isn’t easy. But it isn’t hard either. Managing your expenses, investing early, and in the right stocks can help you build a substantial nest egg. And the longer you keep sitting on it, the larger it will grow.
