How to Become a Millionaire with Right Approach

By Dheeraj Agrawal, Communication Professional

Millennials, i.e. youngsters who are born between 1980 and 1995, love to do things in a new way, and most importantly they have grown up in the world of internet and smartphone. This cohort is today between 25 and 40 years old, almost all in the workforce, more than 85% are married, most have children presumably, and this is the first group of both parents and children with post-liberalization consumption sensibilities. Their large numbers—about 30% of the population—have fueled India’s consumption growth more than any generation before. In this article, you will find out how to become a Millionaire using right direction and approach.

Obviously, millennials need to invest when they have the capacity to spend so much. It is called that the best day to invest is ‘today’ and the best time is ‘now’. This is because the sooner you start investing, the more you get the benefit of ‘power of compounding’. Such is the power of compounding that even famous scientist Albert Einstein called it the most powerful force in the universe.

An example will make it easier for you to understand how to become a millionaire with this approach. If you invest 10,000 rupees every month for 10 years, and your annual return is 12%, then you will get around 23 lakh rupees at the end of the period. If you keep investing this for 20 years, then you will accumulate around one crore rupees. Yes, and if you keep investing these for 30 years, then you will accumulate around three and a half crore rupees. (See graphics) This is the magic of compound interest or power of compounding. Just by a difference of ten years, the amount of deposit increases manifold. So if you start early, you will have a chance to give more time to your investment and also to earn more returns.

Power of Compounding

So, it’s clear from the table that with a disciplined approach and regular investment, the millennial can become a millionaire in a period of 20 years, and that with a small investment amount of 12,000 per month. If you increase the investment amount in a staggered manner, you can achieve that goal much earlier. Now the next set of questions comes, how will this happen, where to invest money to become a millionaire. If you make an investment in a bank fixed deposit or similar debt products, you will not get more than 5-7% returns annually or even lower given the present scenario. The power of compounding will also be less on low interest .(See the chart)

Equity Vs Fixed Deposit

Investing in equity does not mean that you have to get straight into the stock market and put your mind into the buying and selling of shares. You can invest in equity mutual funds, in which you can choose mutual fund schemes according to your risk appetite. There are options like pure equity funds, balanced funds, hybrid funds, small cap funds to cater to the needs of different investors in the market. The best way to invest in mutual funds is SIP i.e. Systematic Investment Plan.

And with investment, it is equally important to cover the risk. So do not forget to insure yourself.  Insurance can be a great support for you and your family in the event of an accident. Therefore, take a term insurance plan for life cover. It is usually better to take a term plan with a risk cover of 10 to 20 times your annual income. Apart from this, do not ignore a family floater health plan. In case of an untoward health emergency, the expenditure burden will not completely fall on your shoulder. These events can derail your savings and investment plans but with appropriate insurance, you can cover the risks. Believe it, if you start investing with a disciplined attitude, you will not only fulfil all your financial goals but will also be able to achieve mental peace.