Do you ever dream of becoming a millionaire? Maybe it seems like a ridiculous idea to you — something that you can only achieve if you’re famous, or win the lottery, or have your own successful business.
What if I told you that even on a modest salary, millionaire status is within your reach? In this episode we’re talking about the everyday millionaire — people who achieve a net worth of one million pounds. They don’t drive a Lamborghini or live in a mansion, but they make great decisions throughout their life to achieve financial freedom. Let’s find out how we can do the same.
An everyday millionaire is someone with a net worth over a million pounds, so that means all of their assets minus what they owe is over a million.
Usually this consists of two main components; a paid off house and a fully funded retirement fund. There might be other aspects contributing to the individual’s net worth too, but studies show these are the two main ones.
The average house price in England is now about £300,000, so a paid off house gets you approximately a third of the way to a million.
In our society, home ownership is something many people aspire to. Strangely, though, we seem to talk less about whether that home is mortgaged or owned outright. If you fill in a survey, both of those are usually lumped under “home owner”, but there is a world of difference. Is the house truly yours, or is it being used as collateral for hundreds of thousands of pounds of debt in the form of a mortgage?
While a mortgage is a necessary form of debt for most people who want to buy a house, having a house with a mortgage should not be the aim or the end goal. Owning a house outright and being mortgage free should be the goal.
Also consider the timeframe you’re going to pay off the mortgage in. Spending twenty-five or even thirty years paying off a mortgage maximises how much interest you are paying. Choosing a fifteen year mortgage or making regular over payments to bring the balance down quickly will likely save you tens of thousands of pounds in interest.
And the sooner your mortgage is paid off, the sooner you can use that extra money each month to invest and grow your financial future.
Let’s move on to talk about pensions and other investments. The idea of having hundreds of thousands of pounds set aside might sound daunting, but it is achievable, even without ever earning a huge salary.
Let’s say that from the age of 25 to the age of 70 you have a household income of £20,000 and that never changes — you don’t get a single pay rise. If you put aside 15% of your income into a pension investment, assuming an average growth rate of 6%, by the time you’re 70 your investments will worth around £700,000. It’s amazing what time and compound growth can yield.
Paying off a mortgage and building a retirement fund are proven steps to becoming an everyday millionaire. You don’t need a six figure salary or a large inheritance. Having a clear focus and being intentional and consistent with your money can produce incredible results.
You probably know a few everyday millionaires, although you might not realise it yet. Why not ask around and get some advice from people further down the line who have consistently made wise financial decisions. What you learn from them could change the course of your life.
I hope that’s been helpful. If you want advice specific to your situation, we recommend speaking to a financial advisor. If you have any questions please get in touch. You can email us at email@example.com. Take care.