I just happened to have this idea of measuring $1 million dollar the other day.
Okay, you heard it from direct sales meeting, seminars, and books about achieving monetary goals:
“Yes, you can become a millionaire!”
” It’s time to earn your first million!”
“You can be financially free!”
If having $1 million dollar today is rich, then in the early 1940s having $1 million dollar is extremely rich!
This is because value of our current money will reduce every year, caused by our ‘generous’ inflation.
Inflation rate goes up over the years, and average inflation hike rate is normally 3.5%.
Simply take this example of a cup of coffee. One cup today cost us $2, in the next 20 years one cup may cost us $4.
Therefore do you think you will be financially free, having $1 million dollar next 30 years? I doubt so.
If you are in your mid 30s, you will need money to start up a family, buy a house perhaps, taking care of parents and apart from all that you want to be financially free…How does $1 million dollar be enough??
A single family home in 1934 cost you $7,000;
In 1960 it will cost you $82,200;
In 1995 it will cost you $272,000;
Almost every 30 years the figure jump by a digit.
So another 30 years, year 2025, how much will a single family home cost you?? I let you calculate the figure.
Here is the chart of an employee earning fixed monthly salary for living:-
When he first started, his income is still above inflation rate, he is fine. In the years to come, if he still gets the same salary, inflation will catch up with his rate. While still earning the same salary, he will become poor before knowing why!
$1 million dollar is not enough for years to come, so what should we do??
This is the chart we should be having:
You need to earn extra income that is beyond fixed salary through investment. You need to cope with the inflation rate, if the inflation rate goes up 3.5% every year, your investment interest should be compounding more than 3.5% every year. Then you make real money!
No comments:
Post a Comment