Money Management

Becoming a millionaire may be more achievable than you think, even if you’re not from a wealthy family. Find out what millionaire-making moves you can make today. 

On paper, becoming a millionaire by 65 can be extremely simple, particularly if you have time on your side. But that doesn’t mean it’s easy. It involves consistently investing a portion of your income, even when there are other demands on your bank account. Living within your means and avoiding debt are both powerful millionaire-making habits.

The good news is that you don’t need to inherit a windfall from a rich aunt or come up with an incredible business idea to build wealth. A survey by Ramsey Solutions into the backgrounds of millionaires showed that 79% of them didn’t inherit family money. Indeed many are accountants, architects, teachers, or hold other relatively ordinary jobs.

Here are four key steps to take to become a millionaire by 65.

1. Once you have emergency savings, invest for the future

There’s a big difference between saving and investing. Your savings are for cash you might need in the near future or are putting aside for a specific goal such as a vacation. Having three to six months’ worth of emergency savings is an important financial foundation because it gives you a cushion against the unexpected. But savings accounts pay relatively low rates of interest, which means saving alone will only take you so far on your millionaire journey.

Investing, on the other hand, is about buying assets such as equities, bonds, or real estate that will generate higher returns over time. There are no guarantees, but historically, investments are a proven way to build wealth. Investments carry higher risks than money you leave in the bank, and there may be years when your portfolio loses value. It’s important to think long term and only invest money you don’t think you’ll need in the coming five years or more.

If you want to retire with a decent sum of money behind you, consider opening a brokerage account and making regular contributions. The S&P 500 is a good yardstick for stock market investments. Over the past 30 years, it’s delivered a compound average annual growth rate of over 10% per year before inflation. That’s an average, but compared with the 0.25% to 4% you might get from a savings account, over time it can add up.

2. Give yourself time

If you’re in your 20s or 30s, the earlier you start investing for the future, the more time your money has to reach that much-vaunted $1 million. The reason? Once you start earning interest on your interest — also known as compound interest — your money can snowball. Here’s a table to illustrate what would happen to a $5,000 investment earning 7% interest every year.

How a $5,000 investment appreciates at 7% APY:

If you did nothing to that money, in 40 years, it could be worth almost $70,000 more than you initially invested. But if you’re able to make regular contributions, millionaire status is within your reach. For example, let’s see how that table breaks down if you were able to contribute $400 a month on top of the original $5,000 investment.

How a $5,000 investment appreciates at 7% APY with monthly contributions of $400:

To some extent, we’re just playing with numbers here. In reality, there will be years when your investments perform extremely well, and others when everything seems to be in the red. Inflation also plays a part, as each dollar has less buying power with every passing year. Even so, the example above shows how a 25-year-old could become a millionaire by the age of 65. In that case, less than $200,000 in contributions could eventually add up to a $1 million portfolio.

3. If you don’t have time, don’t panic

Not everybody has the luxury of time. That doesn’t mean you can’t become a millionaire by the time you’re 65. But it might mean you have to do more heavy lifting to get there. You’re not alone — many of us weren’t thinking about retirement when we were in our 20s and trying to get an education, get a foot on the career ladder, or just enjoy our youth.

Think about what percentage of your paycheck you can realistically put toward your retirement. Might you be able to invest 15% of your income? More? Depending on how important it is to you to reach $1 million, there may be areas you can make cuts in spending. Or perhaps you can take on a side hustle or work extra hours so you have more money you can invest.

Wanting to become a millionaire is one thing, but it’s also a fairly arbitrary figure. Try to work out how much you actually need in your old age. Use your current monthly budget as a rule of thumb, taking into account factors like commuting and other costs that won’t apply if you’re not working. If you can estimate how much you’ll spend in retirement, you can start to work out how much you’ll need to save to get there.

4. Maximize your tax-advantaged contributions

Understanding tax-advantaged accounts, such as 401(k)s and individual retirement accounts (IRAs) can give you more money to invest or save for your old age. A 401(k) is an employer-sponsored account, with the added bonus that many companies will match a certain percentage of your contributions. If your employer offers one, find out how much it will contribute and how much you can put in. If your workplace doesn’t have a 401(k), look into an IRA or a Roth IRA to get tax breaks on your retirement savings.

It’s all too easy to push saving for retirement to the bottom of your financial to-do list, especially in your 20s and 30s. However, if your goal is to be a millionaire by the time you’re 65, the trick is to make regular investments and give your assets as much time as possible to appreciate. Play around with compound interest calculators online to see how much you’d need to invest and how long it might take to reach $1 million.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More 

Delivery workers in New York might see their wages rise from $7 to $20 in July. Find out how that kind of pay rise might help to strengthen your financial foundations. 

What happened

New York City Mayor Eric Adams announced this week that the city would introduce a minimum wage of almost $20 per hour for delivery workers. When it comes into effect, around 60,000 workers will receive almost triple the current average of around $7 an hour, according to a press release. However delivery apps like DoorDash and Uber have hit back at the plans, saying they aren’t in the best interests of workers.

“Our delivery workers have consistently delivered for us — now, we are delivering for them,” said Mayor Adams. “This new minimum pay rate, up by almost $13.00/hour, will guarantee these workers and their families can earn a living, access greater economic stability, and help keep our city’s legendary restaurant industry thriving.”

So what

Whatever your job, a significant rise in pay is reason to celebrate. But before you rush out and spend your new paycheck, it’s wise to wait a little and see how it plays out. For starters, you’ll need to factor in taxes, insurance, and other deductions. And for New York delivery workers, it will be important to see how the app companies react to the new rules.

There’s still a chance that the companies involved will challenge the decision in court. A DoorDash spokesperson told Insider the company is considering several paths, including potential legal action. DoorDash argues the move will limit worker flexibility and reduce the food delivery workforce.

Now what

One of the biggest dangers of getting a pay raise is something called lifestyle creep — spending more because you’re earning more. There are a few ways you can guard against this and use the extra money to strengthen your financial situation:

Make a budget: If you don’t have a budget, sit down and map out where your money goes and what you might do with your pay raise.Pay down debt: If you carry high-interest debt, you might use your extra wages toward paying it down faster. Getting out of credit card debt can help to build financial security as well as saving you money on interest payments over time.Boost your emergency savings: Having three to six months’ worth of money in a savings account can cushion you against the unexpected. See if you can put some of your new cash into your emergency fund.

According to Food Republic, it’s the first time any city in the U.S. has set a minimum wage for this group. It is the result of campaigning by union groups, who have been advocating for increased pay transparency and improved working conditions. If you’re on the receiving end of the new pay, look for ways to use it to build financial security. That way you’ll have a safety net if things go wrong further down the road, or the app companies challenge the law.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash and Uber Technologies. The Motley Fool has a disclosure policy.

 Read More 

The Federal Reserve opted not to raise interest rates at its June 13-14 meeting. Read on to see how that might impact you as a consumer. 

When Federal Reserve officials gathered to meet on June 13 and 14 to make decisions about monetary policy, it was unclear as to whether the central bank would finally hit the brakes on interest rate hikes. The Fed has raised interest rates at its past 10 consecutive meetings in an effort to cool inflation. And given that inflation is still historically high, it wouldn’t have been shocking to learn of yet another rate hike.

But on June 14, the central bank confirmed that interest rate hikes will be paused for the time being. And that’s good news for consumers in multiple regards.

Some much-needed relief

In May, the Consumer Price Index, which measures changes in the cost of consumer goods, was up 4% on an annual basis. That’s an improvement from previous readings, but it’s also not quite at the 2% inflation level the Fed tends to favor in the long run.

But because a nice amount of progress has been made in the course of bringing inflation levels down, the Fed is comfortable leaving interest rates as-is, and not implementing another rate hike. And that’s apt to spell relief for consumers.

Over the past year, it’s gotten increasingly expensive to borrow money on the heels of the Fed’s rate hikes, whether in the form of an auto loan, personal loan, or home equity loan. Credit card interest rates have also been impacted by the Fed’s rate hikes, putting an extra burden on borrowers with balances they’re desperately trying to pay off. Pausing interest rate hikes gives consumers a bit of a reprieve.

Could a pause in rate hikes be the key to avoiding a recession?

For months on end, financial experts have been warning Americans to boost their savings account balances and gear up for a potential recession. Even the Fed itself has said that a 2023 recession could be in the cards — though thankfully, the central bank expects it to be a mild one.

A big reason there’s been so much recession-related concern is that the Fed’s interest rate hikes have the potential to fuel a major pullback in consumer spending. If Americans get fed up with having to spend so much money to borrow, they’re likely to start pumping less money into the economy and putting more into their savings, which could lead to a period of general sluggishness and job loss.

However, now that the Fed is pausing rate hikes, it may motivate consumers to keep spending, or to not pull back on spending to a large degree. And that could be the ticket to avoiding a near-term recession and the pain that could come with it.

All told, the Fed isn’t necessarily done with interest rate hikes. But for now, it’s opting to leave things status quo. Given that this is the first time since March of 2022 that it’s happened, it’s a move consumers should be thankful for. Whether it does the trick of helping the U.S. avoid a near-term recession, however, is yet to be determined.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More 

It’s good to stay on top of your portfolio, but only to a certain extent. Learn about the potential consequences when you check your investments too often. 

It’s never been easier to check your investment portfolio. You can do it in a matter of minutes online, and many brokers also offer stock trading apps that let you review your account from your phone.

As a general rule, it’s good to stay on top of your finances. But when it comes to brokerage accounts, there is such a thing as checking in too often, and it can have some serious negative drawbacks. Here’s what can happen and how much checking in is too much.

You’re more likely to be stressed about losses

The stock market is volatile, so it goes up and down from day to day. The more you check your portfolio, the more you’ll notice those gains and losses. You might think that since there will be good days and bad days, it evens out, but that’s actually not the case.

Studies have found evidence of a behavioral trait known as loss aversion. This refers to how people are more sensitive to losses than to gains, even of equal amounts. So, you’ll likely feel more stress on days when your investments are down and comparatively less relief on days when they’re up.

Nobody likes seeing that they’ve lost money, even if it’s just a temporary loss on your investments. For your mental health, you’re better off not checking your portfolio all the time. After all, it stands to reason that you’re going to see far more down days if you’re checking every day compared to once every three months.

It could lead to poor investment decisions

Seeing more of your portfolio’s bad days isn’t just demoralizing. It can also negatively impact your decision making. Investors with loss aversion sometimes become less willing to accept risk and shift to more conservative investments. A 1997 study on loss aversion found that:

“The investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money.”

Although conservative investments may seem reasonable, they severely limit your portfolio’s growth potential. The stock market is more volatile from year to year, but it also has an average historical return of 10% per year before inflation. That’s far greater than more conservative investments, such as bonds.

You’re wasting your time

Last but not least, there’s not a whole lot to see from your investments on a daily basis. They’re probably not going to skyrocket in value overnight, nor is the market going to completely collapse.

If you have your money in quality stocks or investment funds, they’ll likely gain and lose a few percent here and there. That only matters if you’re planning to buy and sell frequently, but this type of investing generally isn’t recommended. The most reliable option is long-term investing, where you make good investments and hold them for five years or longer.

How often should you check your investments?

As a rule of thumb, check your investments every one to six months. Anywhere within that time frame will keep you up to date on your portfolio, without causing unnecessary stress. Some investors go with once per quarter as a happy medium.

Everybody has their own preferences, so if you want to check more or less often, it’s not necessarily an issue. What’s important is that no matter how often you check in, you don’t make any knee-jerk decisions, such as panic selling because of a temporary price drop.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More