A new year, a new resolve. Top of my list for new year resolutions in 2020 is this:
- Make a million
A laudable ambition, I’m sure you’ll agree. But what is the best way to proceed?
The big money-maker in your life
I’m not expecting to accumulate a million from a standing start in just the one 12-month period, but I am determined to make a jolly good start. And you can apply the philosophy whatever your existing wealth.
Think of the new year as an opportunity to start accumulating a new million, and for the purpose of this thought exercise, disregard the existing millions you might have!
Let’s not forget that earned income is perhaps the most generous vehicle you can use to start accumulating a pot of savings of a million and more. There’s a decent chance that if you add up the amount of money you earn over the course of your working life, it will total more than a million anyway – perhaps several million.
So, step one in my plan to accumulate a million in 2020 and beyond is to work hard in my career. I reckon it pays to attack your career with gusto.
An American writer, poet, and attorney from Indiana wrote a well-known prose poem in 1927, which he titled Desiderata. That’s a Latin word meaning, roughly, ‘things desired’. A line in it reads:
Keep interested in your own career, however humble; it is a real possession in the changing fortunes of time.
And I reckon that’s good advice. You can do several things with your career in 2020 and beyond. Such as splitting off a generous portion of your earnings every month for saving and investing. And throwing yourself heart-and-soul into your work because of the well-used maxim ‘the more you put into something, the more you’ll get out of it’.
By proceeding like that, I reckon you could end up attracting opportunities to increase your income through your career, maybe because of promotion to a better-paid position. Or via bonuses and other mechanisms. And the more you earn, the more money you’ll be able to divert towards your resolve to accumulate a million.
The money multiplier
However, earnings from working are probably not enough to accumulate great wealth because you’ll always be capped by the number of hours you can toil each day. And that’s where investing comes in. Think of the process of investing as a way to multiply the money you’ve set aside from your earnings.
The key to becoming rich is to make your money itself work hard for you. And investing in shares and share-backed funds is one way you can harness the awesome power of compounded returns.
Every time you make money from an investment, whether by selling a share that’s risen or by collecting dividends, plough it back into more investments and you’ll be on the road to compounding your way to a million.
Remember that for any given rate of return, such as 10%, for example, the absolute annualised return in pound notes you’ll receive accelerates over time. Run the numbers – you may be amazed at the potential!
- The State Pension could have you working until 67. Here’s what I’d do to retire early
- The Tullow Oil share price has crashed 55% today. Here's what I'd do now
- Forget the top Cash ISA rate. I'd pocket 7.8% here
- This is how much £1K invested in BT shares 5 years ago would be worth now. Ouch!
- The Lloyds share price is rising - should you buy it and these election winners?
- Top shares for 2020
Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019