How to Become a Millionaire and Retire Early (3 Steps)

Having enough money so you no longer need to work may seem out of our reach at first. However, given time and compounding interest, it’s a whole lot easier to achieve than you think.

I’ve been a follower of the Financial Independence Retire Early (FIRE) movement for a number of years now, with a goal to become financially independent by age 40 (14 years to go…).

Some of the underlying concepts/steps behind the FIRE movement and early retirement are:

Step 1. Work towards saving a percentage of your income

Step 2. Invest those savings regularly in low-fee, exchange traded funds / index funds

Step 3. Repeat steps 1 and 2 until you can retire early (earn enough income from your investments so you no longer need to work)

It’s really that simple. Really.

And of course, the more you can save, the more you can invest and the faster you can retire.

While we each have our own personal goals and requirements, we can all start the process of building wealth for the long-term.

While there are a few more details to this situation than I’ll cover today, we can start to see how anyone can get started and build their retirement fund.

Using my favourite investment calculator, we can follow the above 3 steps to becoming financially independent, starting with $0:

Lets say you want to retire at age 50 (17 years earlier than the traditional retirement age in Australia). And lets assume you start working at around 20 years old, giving you a 30 year working career (… yes, 30 years working 9–5… doesn’t sound very appealing… and that’s 17 years earlier than normal!).

Given that timeframe, we can now move into the 3 steps:

Step 1. Regardless of your income, the most important thing is how much you can save. Below I’ll include some different savings amounts for you to see how much it can change based on how much you can save.

Step 2, again too many details to cover here, but if you invest in a diversified, low-fee fund that aims to match the return of the market, we have seen a return of ~9% over the past 30 years (but lets use/assume a conservative 7% return for our calculations). Disclaimer: past performance is not indicative of future performance.

Step 3, over a 30 year working/investing time frame, I’ve included a few calculations below (based on how much you can save) for you to see how much wealth can be accumulated by following the 3 steps:

30 year time frame
7% annual rate of return
$0 starting amount
Investing monthly

$25 per week ($100 per month) = $116,945
$50 per week ($200 per month) = $233,890
$100 per week ($400 per month) = $467,781
$200 per week ($800 per month) = $935,562
$250 per week ($1000 per month) = $1,169,452
$300 per week ($1200 per month) = $1,403,343
$400 per week ($1600 per month) = $1,871,124
$500 per week ($2000 per month) = $2,338,905

As you can see, if you can consistently save $250 per week and invest it for the long term, you can be a millionaire by age 50 — more than enough to retire early with (that doesn’t even include Superannuation…).

I hope that makes you realise that it doesn’t take much to build wealth, all it takes is small, regular investments over a long period of time.

And the smaller your yearly expenses, the less you need in the future and the earlier you can retire!

While there is much more to cover in this topic, I hope that provides a bit of an overview of how important saving and investing is when building wealth.


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