How to Retire as a Millionaire

Being a millionaire might seem out of reach for some, it might even seem impossible for others, yet the reality of it all is anyone can become a millionaire. There is a simple process that people either disregard, forget about, or just never learned, it is called the Time Value of Money. The Time Value of Money (TVM) is exactly what it says, the value of money over time.

As an example, lets say I offered you $100, but I gave you two options. One option was to give it to you now, at this moment in time. The other was to give it to you ten years from now, so which option would you take? Using the TVM we can figure this out, because there is a difference, $100 today, is not the same as $100 ten years from now! Ten years from now, at a market interest rate of 5% compounded annually, $100 today is actually worth $162.89!
Now you are probably thinking, why would I wait that long for an extra $62.89? Well, most people wouldn't, however, we can use this extremely simple method and apply it to a longer term and witness amazing results.

Here's what you will need:
- An income
- An urge to retire wealthy
- A basic understanding of this article
- A mutual fund
- The discipline to save and invest $200 per month

Now we that we have a general knowledge of how the TVM works, it's time to show you how to make a million dollars in 35 years of investing only $203 per month into a mutual fund.

To begin, a mutual fund is an investment which is basically a "pool" if you will, of different stocks and shares. We will refer to it as a pool because there are different depths of risk you are taking up by investing in a mutual fund. You will have some shares in your pool with low interest rates and no risk, you will have some with medium interest rates and some risk, and you will have some with high interest rates and high risk. All these different rates you are investing in will give will average out and for the sake of our imaginary mutual fund we are using for the example here, our interest rate will be 11%.

So imagine you are the recent college graduate, you've got a decent job, and because you are so motivated for success, you are already thinking of your retirement. You decide you want to have $1,000,000 by the time you are 60 years old. You go buy a mutual fund to invest into, which has an interest rate of 11% and you plan to invest in it every month for 35 years to reach your $1,000,000 goal. So lets figure out how much we need per month.

We are investing in it monthly, so there will be 12 periods a year, for 35 years. This will be a total of 420 compounding periods. Our interest rate is 11%, however we must divide it by 12 (number of periods per year) to get the monthly interest rate, which equates to .9167% interest per month. To get $1,000,000 dollars we would need to deposit $202.91 every single month for 35 years into our mutual fund. That isn't bad at all is it? Definitely not! It would only be a fraction of your income, and if you wanted more at the end of your 35 years you could deposit even more per month.

Let's say you cut back on some expenses and instead of $200, you could save $300 a month, how much would you have by the time you were 60 years old? You would have $1,478,488.91, that's $500,000 almost for saving an extra $100 per month. The more you can save, the better off you will be when you retire!

It is my hope that everyone can understand this simple process, and really take advantage of it. Personally I would rather make small sacrifices each month to pull together at least $200 to invest in my mutual fund, knowing that when it comes time to retire I will be very well off!