Everybody wants to get rich quick. However, waiting 40+ years in the stock market before you can enjoy the fruits of your labor sounds like a lifetime. But before you rush out to buy the latest Mega Millions ticket or play the casino jackpot, see how smart investing can help you reach your financial goals much faster.
Forget about the get rich quick schemes. It’s time to reveal two real ways to “get rich quick.” The good news about these wealth-building strategies is that anyone can do them starting today! Although it might not be the overnight success you’re wishing for, you can speed up the wealth-building process by (Drum Roll Please):
1. Increase your regular investing contributions
2. Invest for higher returns – even a small increase makes a big difference
Both strategies accelerate your wealth when used correctly. However, there are also downsides to consider when making investments. Let’s learn how to implement these techniques into your investment strategy.
Your $90,000 cup of coffee
More than 150 million Americans drink coffee every day. We love our daily caffeine, but did you know that one cup of coffee is actually costing you nearly $90,000? Investing that extra $5 daily into the stock market can significantly boost your wealth when compounded over time. Here’s how:
Person 1 invests $100 per month into the stock market and enjoys a daily $5 coffee from Starbucks
Person 2 skips the $5 daily coffee, but instead invests $250 (original $100 + extra $150 from skipping the extra coffee) every month into the stock market
If they each have 8% returns, at the end of 5 years, person 1’s portfolio is worth $7,347.69 compared to person 2’s portfolio valued at $18,369.21. After 20 years, person 1 will have $58,902.04, and person 2 will have $147,255.10. That’s a difference of nearly $90,000 just by investing $5 more every day instead of buying an extra cup of coffee. Check out the graph below (Figure 1) to see how each investment grows over time.
Also, person 1 investing $100/month will take 41 years to get $1 million. However, person 2 investing $250/month will take only 28 years to reach a $1 million goal. That’s 13 years sooner.
Now, think to yourself whether that extra cup of coffee is worth it. Even if you’re not a coffee drinker, there are several other ways you can find an extra $100 per month to invest. You can get a raise at work, receive your annual bonus, getting a birthday gift or have extra money left over after paying off a bill or debt. The trick is maintaining your monthly budget and investing anything above and beyond.
Get a better return on your investment
Most people living paycheck to paycheck are making the banks rich instead of themselves. For every $100, some traditional banks pay you $0.01 per year while the bank receives $5 for loaning out your money to other clients. Also, saving money in a bank actually causes you to fall behind in the long term due to inflation and other factors. Make sure your wealth continues to move in the right direction by seeking better investment vehicles. Therefore, investing for higher returns is another way to accelerate wealth-building on your journey to “get rich quick.” Imagine achieving your financial goals decades earlier. Here’s how:
Person 1 invests $100 per month into the stock market with 8% annual returns
Person 2 invests $100 per month into the stock market with 9% annual returns
After 20 years, person 2 would have $66,788.69 compared to only $58,902.04 for person 1. One percentage difference in return can equal thousands of extra dollars in your pocket to help you achieve your financial goals. Here’s a chart (Figure 2) to compare portfolio examples:
Different investments provide different returns but remember that higher returns often mean riskier investments. The investing hierarchy provides an overview of the different types of investments to help you achieve various returns. For example, saving your money in a High-Yield Savings Account (HYSA) instead of a traditional bank can yield a 4-5% return, and investments in the S&P 500 ETF fund have averaged 8-10% annually (Remember that past performance is no guarantee of future results).
Selecting individual stocks can give even higher returns. So far in 2024 alone, Google’s (GOOG) stock is up 21% and Amazon’s (AMZN) stock is up 12%. These stocks are part of the Magnificent Seven stocks that have the biggest gains in the stock market. Keep in mind that choosing individual stocks is a riskier investment, and you should consult your financial advisor before investing.
Why these strategies work
Every financial guru has secrets about how to get rich quick. Wealth-building, however, is a life-long journey. It’s better to think about ways to accelerate your wealth to achieve your financial goals faster. Both of these strategies are effective ways that many wealthy individuals have used to build a sizable nest egg for themselves.
Increasing your monthly contributions or getting better market returns provides an excellent foundation for your wealth. Both strategies benefit from compounding interest, which Albert Einstein considers the “8th wonder of the world.” The more money you have invested, the more money that’s able to compound. Additionally, they’re less risky than many of the “get rich quick” schemes. Although investing is a long-term game, smart investing can help you reach your goals decades in advance.
Which is better? Higher returns or higher contribution
You should consider these investment strategies to grow your wealth faster. But which approach is best for you? Before deciding, consider a few things.
An investor should seek higher returns if they:
· Have higher risk tolerance
· More financial information for choosing smart investments
· Longer investment horizon (higher returns are often less liquid)
An investor should plan to increase contributions if they:
· Have flexibility in their paycheck and monthly expenses
One of the smartest things you can do as a new investor is incorporate both strategies into your wealth-building. Increasing your contributions and seeking higher returns simultaneously will exponentially increase your net worth—fast!
If you’re a beginning investor, find out which of these investment strategies is suitable for you. Get your FREE consultation with Paycheck to Wealth to learn more about these strategies to accelerate your wealth building. “Get rich quick” still takes time, but we’re here to make that journey much faster.
Great article!