My artist friend “A” has got it made. At only 25, she’s already invested enough in index funds to achieve $800,000+ at 65 with no further contributions. How, you ask? Here’s how someone earning less than $10,000/year will become a Millionaire in her lifetime.
“A” isn’t rich, but she’s Smart As Fuck. Her family was able to put away some money for her education, but she also did plenty of working and saving on her own. She ended up getting shitloads of scholarships though, so within a year of finishing school, she found herself sitting on $50,000! Well, fuck, I guess that money’s going into index funds! A longtime Mr. Money Mustache devotee, “A” figured index funds were the best place for her money, and at her age, IT IS. With the 7% return I talk about so much, her current $53,896 becomes $807,063 in 40 years! To make matters even more mindboggling, SHE EVEN HAS AN EMERGENCY FUND OF $14,000. We’re not even done yet, because SHE’S SO FRUGAL, THIS WOULD LAST HER 20 MONTHS. Not possible? Here’s her living sitch.
Income is a terrible indicator of success. “A” makes $700/month as a freelance artist. Over a year, that’s $8,400. Her monthly rent is only $200. That’s because she lives with three other people. She’s been with her boyfriend for over five years, and even if something terrible happens, she’s open to moving back in with family. She can live comfortably on $700/month. She spends $80 on groceries, about $45 on entertainment, and puts aside $40 for potential emergencies. Her phone costs $25, about $25 goes into dental, and stuff like clothing is practically negligible because she shops at thrift stores. She breaks even every month. WHAT ARE YOU AND I DOING WRONG.
“A” may be frugal, but she’s not living a small life. She’s already been to five countries including Japan and China, she’s done a road trip across the US, and she’s also seen several Canadian provinces. She also – like me – works at her dream job, so it really doesn’t feel like work at all. She’s practically retired already! What would YOU call it if you could do whatever the hell you wanted and just happened to make $700/month?
“A” also knows she can do better. In my interview with her, she talked about getting to $15,000/year reliably and aiming for $375,000 as her FI goal. If, right now, she puts aside just $100/month for her index funds, she’ll hit that number in 25 years! Mr. Money Mustache once said, “If You’re Not Getting Rich in your 20s, You’re Doing it Wrong”. Your twenties are the MOST IMPORTANT TIME TO SAVE because the compound interest gains are unreal. Being a Millionaire is within your reach.
“A” makes less than $10,000/year. What’s your excuse?
Ask us anything on Facebook.