Yahoo Finance How to Make $1 Million in 10 Years Through Saving and Investing
Written by Amy Legate-Wolfe at The Motley Fool Canada
It’s certainly possible. If you want to create $1 million in just 10 years, it’s going to be tricky, even difficult, but doable. However, only if you’re saving, cutting back, and investing in that time. So today, let’s look at how people reaching retirement can earn that big boost in income, while reducing their risk as well.
Cut back
Now this might be an obvious question. However, how many investors who want to reach that $1 million goal are really cutting back? To do so, there are a number of ways you can seriously cut back if you hope to achieve $1 million in just a decade.
First off, downsize, or even move if you can. This can bring in a large portion of income that can be put towards investments. From there, you’ll want to reduce any non-essential part of your everyday operating budget. For instance, while it might be nice to drive to work in your own vehicle, consider selling that vehicle and taking the bus or subway. This can again seriously reduce your overall costs.
But we’re not done yet. To make even more cash in this next decade, you’ll want to put aside money each and every month rather that just look for quick cash through sales or extra income streams. For this, you’ll need a budget.
Budget and save
Now you may already have a budget, but you may not have a net-zero budget. This is where you take your net income and sign a dollar amount to every line item of your budget. Start with essentials, such as debt payment minimums and household bills. These you can set up to make sure automated payments are going out every month, which will also prevent any interest build up.
Then, you’ll want to go over the items that fluctuate from month to month. This would be groceries, eating at restaurants or ordering in, anything like that. Now you’re going to want to cut these back as much as possible, but don’t go too far. If you cut entertainment down to zero, you risk relapsing and spending a bunch all at once. This would ruin all your hard work!
The idea, however, is that you assign a value to each and every item on your budget. Down to zero. Once you’ve assigned every line item to essentials and non-essentials, you should then be able to put the rest into your savings. And then you can start investing.
Start building
With that amount now being put into your investing account, you can start building towards that $1 million. For this I would consider a company that has seen a lot of growth over the years, and is likely to continue building. Something like Fairfax Financial Holdings (TSX:FFH).
Fairfax stock has done well in pretty much any market, including this one. The company’s underwriting practices do well in high interest markets, and value investments recover when the market does as well. Thanks to CEO Prem Watsa, the next decades should be strong ones for investors.
Fairfax stock has grown at a 10.3% compound annual growth rate (CAGR) over the last two decades. It also offers a 1.37% dividend yield. If you were able to put aside $1,000 towards investing each month from this saving method, you could have $12,000 to invest. Let’s see what could happen in the first year.
COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
FFH – now | $1,464 | 8 | $20.29 | $20.29 | annual | $12,000 |
FFH – 10% increase | $1,614.80 | 8 | $20.29 | $20.29 | annual | $12,918.33 |
In the first year alone, you’ll have added almost another $1,000. If you invest more, or even just continue adding and reinvesting as you go, there is nothing you can’t achieve. Even $1 million in a decade.
The post How to Make $1 Million in 10 Years Through Saving and Investing appeared first on The Motley Fool Canada.
Should you invest $1,000 in Fairfax Financial right now?
Before you buy stock in Fairfax Financial, consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fairfax Financial wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $15,578.55!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.
See the 10 stocks * Returns as of 3/20/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool has a disclosure policy.
2024
