gentlemen let's talk for a moment shall we
it seems like every time I get on YouTube these days I get bombarded with
a certain kind of that that's these self-proclaimed millionaires flexing
their Nissan GT eyes or Lamborghinis they're usually offering some kind of
course teaching you how to be a millionaire in just a few months with
drop shipping amazon FBA Shopify you make them I swear this is the new tie
Lopez of advertising on YouTube that led me to today's conversation talking a
little bit more about what does it actually take for the average American
to become a millionaire in the least gimmicky way possible for the research
I've done the average American can become a millionaire with in his or her
lifetime so first off let's go over what does it actually take you to become a
millionaire I want to go ahead and head over to my ghetto whiteboard and show
you what it actually takes and do the math together on what it takes for you
as the average American to become a millionaire
in your lifetime so here we are guys at my kettle whiteboard to prove a point
and to be able to do this math together with you guys so first off 1700
millionaires are made every day on average now starting off I'm gonna use
the averages here to really prove my point so first off the average American
makes around fifty nine thousand dollars per year so let's say the average
American decides to invest ten percent of their income
they just see it as a tax or tithe and they just do it every month without even
thinking about it that would equal around five hundred dollars per month I
actually rounded up just a little just to make the math a little bit
easier so let's say that in our example the average American starts investing at
age 22 the fresh out of college they just started their first job decide to
opt in to employers 401k match and they decide to do so for 45 years so the
average S&P 500 return is around 10% every year compounding interest now for
those who don't know the S&P 500 is an index that tracks the market 500 of the
biggest American companies so it is a good indicator of how the stock market
is doing in the average return every year it's pretty diversified now again I
want to preface this by saying I know there's gonna be some haters who say oh
this impudent actually return 10% every year or some may say it's more or some
may say we're not calculating inflation well there's a lotta different things
are going into this as well and just for the sake of comprehension I'm not gonna
dive into that directly we're not considering inflation yes
we're saying that you're sticking with one income of the rest of your life
again because this is an average so also making the assumption that you'll never
get a raise for your entire life you never make more money than fifty nine
thousand dollars for you so one of these assumptions let's even go a little bit
below the average and start off by saying let's say the average return that
you get over the life of your investments is 8% every year so with an
investment at around five hundred dollars per month forty five years at an
8% return I'm not gonna do the long calculation here because it's totally
unnecessary there are plenty of calculators
there that can do it for you which I'll include in the link below now Jenna at
500 hours per month for 45 years at 8% return every year at the age retirement
of 67 you will have approximately 2.5 million dollars in your retirement
account and again you have to recognize this is under the 10% return on average
of the S&P 500 so let's go a step further and say you only get six percent
returns unfortunately every year what would that look like with everything
else being the same except for your return every year which is 6% you would
instead earn one point three five million dollars and your retirement
account and that's just a 2% difference between 8% and 6% and finally let's say
that your retirement account returns the sp500 of 10% every year instead you
would instead return four point seven million dollars at the age of retirement
and again you have to recognize that nothing else is changing except the
return every year so you can see how even just 2% and changes a lot so let's
just say that you just want to be in the millionaire Club and assume that the S&P
500 is going to do what the SP 5 it has done in the past return 10% every
year what would it take for you just make it into the millionaire club
if the SP 500 returns 10% every year it takes only about $115 every month at the
age of 22 to the age of 67 for you to reach million-dollar status so I hope
that at this point I have your attention you're like Jake I'm fired up let's do
something about this if that's you great because the next point I have to make is
about time one of the only ways the average American can become a
millionaire in the lifetime is by utilizing time compounding interest is
your best friend and quite frankly the only way for you to get to that status
so allow me to paint a picture for you on how time is so important and
investing for example let's say my coworker Susan decides to invest $5,000
per year into a 401k or IRA let's say Susan decides to start investing at age
25 and unfortunately at age 35 she has some medical issue to where she has to
pay off those bills unfortunately can't invest any longer she is invested for 10
years around $50,000 and at the age of retirement for her which is 65
she has accumulated over $600,000 in her retirement account
don't say my other co-worker Bill decides to start investing at age 35
it's a little late to the game he invests the same amount every year
$5,000 but decides to do so between age 35 and age 65 at the time of which he
retires he will have invested over $150,000 of his own cash and only have
about five hundred forty thousand dollars in the bank now here's the
kicker Susan has invested $100,000 less than
bill yet has $60,000 more in a retirement account
at the age of retirement this just drives home the point that time is on
your side compounding interest and investing so as you can see start
investing now don't hold off another year don't wait for another life
experience to pass you by start now even if it's only $100 $200 $500 $10,000 a
month just do something to take advantage of a crewing interest so at
this point you might be asking how do you invest you got the basic
understanding down now and we've done a little bit of the math together so
you're probably wondering how do you start investing today and that's a great
question in fact I'm going to hold it off for another videos we're getting a
little long here but let me leave you with one other calculation this math is
easy yet a majority of Americans won't take advantage it won't be millionaires
why do you think that is from the calculations I've found at age 65 the
average American only has around $160,000 saved up the truly sad thing
about that statistic is let's say for example you're in college at age 20 and
you decide to kick that Starbucks habit and instead of buying that latte once a
week you put that $20 every month into a 401 K index bun like the S&P 500 now as
we talked about it returns around 10% every year if you invest that $20 every
month into the index fund and you do so between the ages of 20 all the way until
the age of 67 which is the average age of retirement you will have over
$200,000 in your retirement account so this just shows how unprepared the
average American is for retirement and why is that that is because a majority
of Americans do not capitalize on the one thing that'll make them rich which
is time interest so now you don't have an excuse
you know better so start doing something now but my worst case scenario is a
million dollar net worth at the age of timer I'd be pretty happy how I view
this information is if I can have this in my back pocket
and just do the small things of investing in my retirement every month
without even thinking about it and know that in my future the worst-case
scenario is a multi-million dollar net worth then that gives me the confidence
do as an entrepreneur the things I truly want to do and have the confidence in
doing so again my name is Jacob Haynes thanks so much for watching this video
and look out for my next video on how to actually start investing