Dollar bills in glass jar on wooden background. Saving money concept.

Saving tips from a financial expert

The goal of becoming a millionaire while starting out with “zero” is something we all can strive for — one bite at a time! I call it the 10 percent theory of asset accumulation and it works like this:

A $1,000,000 goal when you are at the beginning of your road to retirement is far too big for most people to visualize or comprehend, kind of like eating an elephant. When starting off with nothing, $100,000 may be too enormous of a goal as well. In fact, most people cannot even realize accumulating a sum of $10,000, as it is too far down the road to visualize with clarity; However, $1,000 is a manageable goal and definitely a sum that one can see crystal clear. So, herein lies the goal — to accumulate $1,000.

Starting with as little as $50 per month, one can open a mutual fund account with an automatic investment program that will draft your checkbook on any business day or multiple business days each month. Choose a comfortable and realistic withdrawal pattern for your budget and authorize the investment company to draft $50 as frequently as possible. Unless you are increasing the frequency of your contributions, or increasing the contribution amount, you should never deviate from this plan.

Very quickly, one can realize their goal of accumulating $1,000. The other accomplishment is that you are now 10 percent of the way on your journey to the $10,000 goal, as it has moved into focus since achieving the first $1,000.

By practicing the identical behavior from the first goal, you will accomplish your next goal as well, since you now have $1,000 compounding and growing alongside your continuing contributions. If possible, continue to increase the frequency and amount of contributions, even if by only one extra day per month and/or a few extra dollars. Given enough time, you will achieve your goal of a $10,000 retirement portfolio, and now are 10 percent of the way to $100,000.

Once at that level, you should begin to diversify your fund holdings by adding to the other opportunities in the fund family. The $100,000 goal begins to come into focus the same way you have accomplished your prior goals. This method of meeting small goals one at a time instills the habit and discipline of systematic investing. Don’t get dissuaded by the hurdles, potholes and pitfalls that periodically liter life’s road to financial independence — you will find a way through.

Be diligent with following the 10 percent plan. Continue to contribute, enhance and increase your frequency of contributions. As your balance grows, further diversify your fund allocations. It will take time, like all your goals before, but your compounding $10,000 plus future contributions, coupled with market performance, will, on a quarterly statement from your mutual fund family, proudly demonstrate a $100,000 number. And now you are right back to where you started, 10 percent of the way to your ultimate goal of accumulating $1,000,000.

Your personal retirement portfolio will be in addition to your employer-based plan, like a 401(k), which you should probably never sacrifice at the expense of your personal plan contributions. Shortly, you will be able to further diversify your holdings by taking from your personal plan to invest in things like a rental property. Your plan dollars can be used to fund the down payment for this property and the rent will cover the mortgage, taxes and insurance. Hopefully, there will be a positive cash flow that can be redirected back into your plan as additional monthly contributions. If you go this route, it is important to note that you should likely purchase an easy-to-rent year-round property, not a seasonal rental. With some effort, these properties are available and should probably yield an 8 percent or better return before debt service.

In time, your real estate appreciation, coupled with your debt reduction payments, and on-going (and never-ending) contributions to your personal plan should one day be worth $1,000,000! And you know what? You are 10 percent of the way to your new goal of $10,000,000. This plan has a proven track record — I would know, as I have done it successfully myself.

Mark Charnet, founder and CEO of American Prosperity Group, has been in the retirement and financial estate planning field for over 35 years. Mark has numerous certifications and credentials, including Life and Health Insurance, Certified Annuity Specialist and FINRA Series 6, 63, and 65 Securities Licenses. APG’s unique approach to retirement and legacy planning allows clients to retire with confidence. To contact Mark, please call (973) 831-4424 or visit www.1apg.com.

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