The Easiest (Long Term) Way To Become a Millionaire

Though patience and investing is required, it really isn’t that hard to do, over the long term!

Many people don’t know how to become a millionaire, or how to even live a financially stable life. This isn’t always due to the lack of perseverance or hard work, (though it does help to have the last two!) It is more of a lack of financial understanding and awareness of tools to get there.

The main thing that will be focused on this post is how to become a millionaire the long-term way, and the easy way. This isn’t going to talk about ‘get rich quick schemes’ but rather how anyone that’s dedicated with patience and the willingness to diversify can become a millionaire. This isn’t bad advice, especially for the younger crowd, (like 17-year old’s like me!) This will be explained later…

First off, before I go on, I need to cover a topic that many of you haven’t heard of this… Drum roll please…. ‘Compound Interest.’ Basically, in a nutshell, compound interest is interest off of interest. It is something that grows exponentially, not just 10+10+10 and so on. Here is an example of the magical power of compound interest. Remember this is just an example of compound interest, not the real thing that I am going to teach!

Here is a commonly used example– Say I were to offer you 2 prizes, one is to take a penny that is doubled 30 times, and another is 1 million dollars. Which would you rather choose? I’m sure there are a good majority of you that would rather just go ahead and take the 1 million dollars. However, many of you would be surprised. The penny doubled 30 times would end up being preciously……

1 0.02
2 0.04
3 0.08
4 0.16
5 0.32
6 0.64
7 1.28
8 2.56
9 5.12
10 10.24
11 20.48
12 40.96
13 81.92
14 163.84
15 327.68
16 655.36
17 1310.72
18 2621.44
19 5242.88
20 10485.76
21 20971.52
22 41943.04
23 83886.08
24 167772.16
25 335544.32
26 671088.64
27 1342177.28
28 2684354.56
29 5368709.12
30 10737418.24

over $10,000,000! Very neat how one penny could end up being over 10 million dollars.

Now the way this applies to the real world is having your money grow with compound interest, except but this time in the stock market.

In case you don’t know what the stock market is, which by the way it’s always good to learn new financial vocabulary, it is the market as a whole of all the stocks out there. A stock is basically the share-hold of a company and is a type of investment. The stock market is risky though, especially if you buy just one stock.

The real way to easily become a millionaire, for simplicity and for being more guaranteed over the long run, is by diversifying your stocks as much as possible. This would be preferably being done by doing an investment such as an index fund. This is something where you a whole market of stocks is compiled into one fund.

On average over many decades the most popular index funds like the S&P 500, have on average returned roughly 10% a year. That means that a $1.00 one year could end up being 1.10 the next year.

Compound interest applies to the stock market very well, your money over many years can grow into something big. Now can I tell you exactly when you can become a millionaire? No, since there are so many variables involved, like how much you invest into the stock market. Ideally you should invest as much as possible on a monthly basis, but don’t put in more than you can afford to lose! There is always risk involved, and when a recession hits, the stock market can go down drastically, but will recover in the long run.

The idea is to follow the ups and downs, and hold onto your investment for as long as possible, and again, diversify. As long as you do all of that, you could be a millionaire with a pretty high probability in a matter of decades. This may sound like a long time, but the more you put in and the earlier you do it, the sooner you will reach 1 million dollars.

I hope you found this helpful, and since this was just a introduction to the amazing world of investing and the stock market, continue to learn and do your research, future millionaires!

 

Why As a Teenager, Am I Concerned About Our U.S Economy… And Why You Should Be Too!

Even though many are still optimistic about the future of our U.S economy, don’t be optimistic just yet, or not welling to make change!

 

I am a teenage boy, just at the ripe age of 16 (soon to be 17.) People might wonder why I would be interested in such a subject, especially considering the fact that I am part of a such a young group and a supposedly ‘care free’ group. Not only is it an interest of mine, which I have even just finished my first draft on an economics book that I am writing, I also am simply anxious about how things are. I’m not just typically anxious about how the economy will be in the days, months, or years to come. I am worried about how it will come for my generation.
You often hear in times like this about how everything is going well. The unemployment is quite low, wages are going up, and we are successfully getting out of the 2008 recession. The stock market continues to go up, and overall, at least a portion of the population is content with how things are. Welcome to the economic cycle, the economic booms and busts, goes up, then comes down. Throughout history, especially recently there has been a lot of corruption that has led to downfalls and recessions in our economy. Though different people with different points of view will have a variety of explanations and claims for what is causing these downfalls in our economy, I see it as a lot of greed and misunderstanding. Many will agree that corruption going on in wall street was a big cause of the last recession, and I am among that group that thinks so.

Inequality continues to soar, while the middle class is stagnate, along with the majority of the population, even for some likely going down! Just looking at the charts, the top 1 percent has skyrocket over the past few decades, while little growth for most people has continued to happen. Also, power and greed continues to occur with places like the big banks, and certain monopolies continuing to lobby and hold special interest groups that has a strong say in our politics, and even amongst our politicians. Don’t get me wrong, I’m not against all monopolies, banks, and even wealth in general, but I don’t agree with record high inequality and lack of say and power amongst the middle class, while the top continues to profit. Problems continue to occur for the middle class, like a lack of a good health care system (which is about to change in a worse way, with millions losing their coverage as I speak.) Also, problems like college tuition continuing to beat inflation, and becoming unaffordable for many, especially for people with lower incomes.

So how does this all come of concern to a 16-year-old high schooler like me, and for many others in my age group, (or younger?) Well… for one, our society could continue to get worse inequality. Again, I’m not against some inequality, which is essential for a function-able society and for people to be motivated to work hard. I just don’t see our society with extreme inequality being good for anyone, even for the wealthy, without a strong middle class. Rather than looking at the trickle-down theory that many people started to believe in, especially since the Reagan area, why don’t we instead look at possible a ‘trickle up theory.’

As I get older, I want to see an educated middle class, where every teenager and child has the right to have a future and a good education, without a boatload of student loan debt. I believe that with more consumerism, and opportunity for the middle class to be more productive, and even more startups and entrepreneurs, we can have a better society and standard of living for everyone. Things aren’t all bad though, the standard of living has gotten much higher, even for the world over the many decades. The question is though, can it continue to get even better, especially for everyone? It is a concern that our GDP for last year was only 1.6% last year. I think everyone can agree on that. The question is, how can we make a society that benefits everyone, and use the best of our scarce resources? That’s what economics is all about.
As I spend more time on my blog I will talk more about how we can fix these problems, at least from my point of view. I am not expert or economist by any means, I’m just a 16-year-old boy, (who you could argue is kind of liberal!) However, I am anxious about the mentality and the statistics, and where we are heading. I think we can accomplish many things if we all work together and really look at the numbers, and have a good fundamental understanding of economics. Everyone, especially people my age should be more educated with economics, and other relating subjects like personal finance, now more than other. We can make change happen, and have our voices, (and hopefully my voice too), heard!!!

May I Suggest a New Tax Plan?

 What if rather than focusing on more or less taxation overall in our U.S economy, instead we have an alternative tax plan with a bit of both?….

 

As I have mentioned in one of my previous articles, there are many problems with our current United States economy. That article also mentioned how our economy may not be heading in the best direction, in the near and distant future. I mentioned all the problems, ranging from the massive inequality, to the corruption and greed going on, as well as an assortment of other problems, other than a few positives like a long-term upwards trend on standard of living. I believe that a major potential fix for our economy could potentially be an alternative tax system, unlike the majority of tax plans of many other countries throughout the world.
I think both Conservatives and Liberals alike can agree that Republicans overall want a decrease in taxation, and Democrats want an overall increase in taxation on everyone. That is a major problem. Both have pro’s and con’s, but it shouldn’t just be fully one or the other.
With a decrease in taxes, though you could potentially get more consumerism, and (with assuming a decrease on everyone’s taxes including the middle class), you could get a middle class that could potentially be able to save more, send their kids to college, etc. On the other hand, the government would have less money to spend that would benefit different groups of people such as the middle class and poor with welfare, public assistance, cheaper tuition, etc. In the United States, the percentage of the GDP being from the government is already very low compared to other countries, particularly in Europe.

Now with an overall in increase in taxes, you could in return have a bigger government that could make our society better with infrastructure and better education, and many other things. It could even involve paying off more of the national debt. Also, a higher taxation on the wealthy could really help redistribute the wealth and fix the major problem of inequality. However, the downside is this could hurt some of those with lower to middle incomes, considering many are already just breaking even, and don’t have much money to consume. Though many could potentially get this back with a variety of government programs, whats the point if its already taken from their own paychecks? Also think of the costs of transitioning the money from those people to the government and back into government services.

What if rather than having a tax plan that heavily taxes more or less on everyone in general, we have one that is rather, really progressive, but with big cuts to taxes with the middle class, and virtually no taxes for the poor (or at least very little.)

In simple terms…. this would be something like a huge decrease in taxes for those in the lower income quartile. A good decrease for the middle class in taxes, as well as more tax deductions in general. Then about the same taxes for the upper-middle incomers. Finally, a big increase for upper-incomers, and a super tax increase for the super wealthy.

So why have a taxation plan so progressive yet with so much cuts for a good amount of the population? Well the top 1 percent of our countries wealth, as well as the top 5% own a tremendous portion of the country’s wealth. Basically, as you get to a higher and higher percentile in income, you end up owning more and more of a stake in the wealth distribution. If we focus just on taxing mostly from the wealthy, you may possibly end up with more taxes than before, despite big taxes from everyone else, this is simply because the small percentage of the population that holds the majority of the wealth, holds such a large amount of money that can be taxed and more evenly distributed! The tax cuts from the middle class and poor can be beneficial on the other hand to the wealthy, because of the more consumerism that will result in them being better off. This will really help more spending in our economy and better profits for businesses, which results in more money for the wealthy in a sense. Think of rather than a ‘trickledown theory’ a ‘trickle up theory!’

Below is a rough idea of what I would believe to be a good alternative tax system, rather than just an increase or decrease in taxes overall! I call it the ‘Dwyer Ideal Tax Bracket’, named after me. (Something to keep in mind though, this is what I think each incomer should be taxed at, at the end of the day, not at what each dollar at each income bracket should be taxed at, like in the actual tax plan. However I do believe it should continue to be taxed on per dollar, rather than instantly change on each income amount.)

Capture taxThis is certainly quite different then our current tax plan and many tax plans throughout the world, especially considering how progressive it is. Though this might sound like a good plan, it is yet another problem to close up the loopholes in the first place that many of the ultra-wealthy take advantage of! If you are interested in reading more about my idea’s behind this tax system, as well as other economic insights in general from a teenager, read more from my blog, or wait for the book that I am close to finish writing to come out. It is about growing our economy! Stay put!…