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How to Grow Rich on a Budget

Learn Money Girl's 4 ways to build your wealth and grow rich—even on a budget.

By
Laura Adams, MBA
5-minute read
Episode #200

Grow Rich Strategy #2: Start Investing Earlier Rather Than Later

They say the early bird gets the worm. That proverb is certainly true when it comes to building a fortune. Putting time on your side can explode your wealth due to one of the greatest gifts math has ever given us—compounding interest.

Here’s an example that says it all: Let’s say your goal is to retire at 65 with a cool one million dollars. If you begin early, like when you’re 25 years old, you’d only need to save a little over $400 per month, assuming an average annual return of 7%. Paying $400 per month over 40 years comes to a total investment of $192,000 ($400 x 12 payments x 40 years).

Protect your fortune by having enough of the right kinds of insurance, such as health, life, disability, long term care, and an umbrella policy.

But if you wait until you’re 35 to start investing, you’ll need to cough up almost $900 per month, also assuming a 7% average annual return. You’d have to invest a total of $324,000 ($900 x 12 payments x 30 years) to accumulate a million dollars in 30 years. And if you’re a financial late-bloomer and don’t get started until you’re 45, you’ll have to shell out over $2,000 per month, assuming the same 7% return. My friends, procrastination is expensive! You’ll end up investing $480,000 ($2,000 x 12 payments x 20 years) to become a millionaire in 20 years.

Comparing these scenarios makes it clear, right? I don’t know anyone who’d rather invest $480,000 instead of $192,000 to reach their retirement goal. There’s simply no better way to accumulate a healthy nest egg than to start early. Even if you put aside $200 per month for 30 years at an average 7% return, you’d amass over a quarter of a million dollars.

Time is a critical factor that affects your ability to build wealth. So stop using excuses like, I don’t have enough to invest, the market is too high, or the market is too low. Remember that waiting to invest is hazardous to your fortune and future financial security.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.