If you ask a financial planner what you need to do to be comfortable in retirement, you often get the “million dollar” answer. Of course, depending on how you live your life, it could be a lot more or a lot less but arguments aside, a million bucks is a nice goal. So I’ve constructed a game plan for young people that involves just $6 a day!
Smart people pay for advice
Of course, the older you are, the more you will need per day to hit the magic million mark and you’ll probably need advice to make it happen.
On the road to riches
Before explaining my $6 a day plan for budding millionaires now in their 20s, let me share with you 10 ways to put yourself on the road to becoming a millionaire.
1o steps to being a millionaire
- Have a financial plan to make it happen and do it with or without a financial planner. A plan is the starting point that creates the vision for you to be a millionaire.
- Read what millionaires read — business sections, money magazines, financial websites, etc.
- Don’t be afraid of second jobs — when I was a schoolteacher, I tutored economics at the University of New South Wales part-time.
- Buy a home and strive to pay it off quickly — it’s very tax effective as it does not attract capital gains tax if you sell your principal property.
- Learn how to do renovations and how to hire good trades people effectively. Understand the economics of renovating as it gives tax-free capital gains.
- Become a landlord and use the tax system to help you reduce your tax bill to give you cash flow to own a property that gives income and grows in value.
- Use the increasing value of your property to buy another property to rent out, to reduce your tax bill and pick up more capital gain.
- Learn how you can borrow to buy shares. You don’t have to go over the top but this could be an alternative to being a landlord. You could have a portfolio of great income paying shares and you could borrow to hold more of them, using the tax system to reduce the cost of the play.
- Start a small business on the side. This could be a stepping stone to eventually turning your business into a full-time venture.
- Take in a lodger to help you pay off your property quicker — this could be good for a young person who might otherwise share accommodation with other young people. The granny flat option can also make a property play work for you budget-wise, as you receive income and you get tax deductions. The son of one of our friends recently bought an apartment and is putting the second bedroom on Airbnb. That way he gets ‘rent’ but doesn’t have to live with a tenant all the time. He can choose when he wants to rent out the room. But be careful of any capital gains tax implications of this.
10 now, 10 later
OK here are the first 10 tips for you to digest. Next week I’ll give you 10 more and some advice on what to do to ensure that you do them!