Myths that Keep You Broke #13

Myth #13 - Small Amounts of Money Will Not Lead to Wealth:   

I’m sure you have heard the expression that it takes money to make money. If you take this logic to the next step, then it would seem that it also takes a lot of money to become wealthy.

If you keep following this logic, then you may be thinking, “I don’t have a lot of money, so I can’t ever be wealthy.” Thankfully I am here to tell you that this is a myth. Small amounts of money definitely can lead to wealth.

There is a classic math class hypothesis that teachers have used to best explain this principle. The teacher asks students to guess how much money they would have at the end of 30 days if they start with just one penny and they double it every day.

Students often guess $300 or maybe even $1000. But thanks to the principle of compounding, the answer is actually over $5,000,000!

Now, most investments don’t yield a daily 100% return, but it does prove even small amounts of money can lead to big amounts. Therefore small amounts of money, invested, can lead to wealth.

In my workshops, I show how $10 per day (like a specialty coffee and muffin at Starbucks) can create a $1,000,000 portfolio that can spin off $120,000 per year of income. That is $300 per month or 10% for someone who earns only $3000 per month.

My personal experience is an excellent example of this principle. Again, I was broke at age 50, and after expenses, I didn’t have a huge income. I was only earning $5000 per month. I used the same principle I suggest for others; save 10% of what you earn. I could have waited 20 or 30 years until I had saved hundreds of thousands of dollars to buy my first apartment building.

Instead, I took a calculated risk. I took everything I saved in 3 years, $18,000, and with two others we took out a loan and purchased a three unit building. I leveraged my small savings with two others. The key is that I invested the small amount of money I had saved, instead of spending it or letting it sit in a low-interest savings account.

The key to both the penny equation and the way I launched my path to wealth isn’t about having a lot of money before investing, NOR paying off credit cards before I invested. It was: Start investing now, in smart investments. Starting to invest, even with $20, you can do today.

Smart investing takes knowledge. But you are not alone on this journey.

Check out my other myth-busting advice to find out how you can both start investing and make smart investments – even with a small amount of money.

How much can you set aside today, tomorrow and the next day?

To Your Prosperity,

Rennie