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Refering to this question: Can saving investing 15% of your incoming start 25 likely make you a millionaire

In France the highest rate I can find is about 2%, with special conditions, while the post is talking about 6% in America.

My salary per year is about 50K. 35K in France is already a lot of money, considering we have health care and taxes; our salaries are weak compared to the US.

Knowing this, a person living in France can't be millionnaire saving only on salary. Even 40% will take so many years and it's so much! Or maybe I'm wrong?

Valentin Silvestre
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    You're operating from a false premise: when that post speaks of "investing" they refer to the stock market. What you're thinking of is a savings account. They offer a safer place to park your money at the cost of a much lower return. But I'm not sure what you're really asking here. There are many ways to become a millionaire. – Lilienthal Aug 01 '17 at 11:47
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    'Millionaire' is obviously a different thing depending on currency. But yes, if you save your money under your mattress instead of investing, it becomes much harder to reach any goal. – Aganju Aug 01 '17 at 11:59
  • @Lilienthal But, how can the OP of the post be sure that he will earn money ? You don't know if invest will be worth or not.. – Valentin Silvestre Aug 01 '17 at 13:01
  • As @Lilienthal said, I was wrong about the post, the post I'm talking about is spreaking of investing money, not keep them is bank as I were thinking. So basically, I need to invest. – Valentin Silvestre Aug 01 '17 at 12:58
  • @ValentinSilvestre That's potentially too broad of a topic to address here and it's hard to really "answer" as you need to cover that statement in "ifs" and "buts". The short of it is that historically various reliably diversified stock markets have generated a long-term annual return between 6 and 12% even taking crashes and recovery periods into account. The reasons why touch on how our market system works and are out of scope here I assume or I'd suggest posting a new answer. This question is related but doesn't address the why at all. – Lilienthal Aug 01 '17 at 16:41

3 Answers3

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I get the sense that this is a "the world is unfair; there's no way I can succeed" question, so let's back up a few steps.

Income is the starting point to all of this. That could be a job (or jobs), or running your own business.

From there, you can do four things with your income:

  • Spend it
  • Save it
  • Give it
  • Invest it

Obviously Spend and Give do not provide a monetary return - they give a return in other ways, such as quality of life, helping others, etc.

Save gives you reserves for future expenses, but it does not provide growth.

So that just leaves Invest. You seem to be focused on stock market investments, which you are right, take a very long time to grow, although you can get returns of up to 12% depending on how much volatility you're willing to absorb.

But there are other ways to invest. You can invest in yourself by getting a degree or other training to improve your income. You can invest by starting a business, which can dramatically increase your income (in fact, this is the most common path to "millionaire" in the US, and probably in other free markets). You can invest by growing your own existing business. You can invest in someone else's business. You can invest in real estate, that can provide both value appreciation and rental income.

So yes, "investment" is a key aspect of wealth building, but it is not limited to just stock market investment.

You can also look at reducing expenses in order to have more money to invest.

Also keep in mind that investment with higher returns come with higher risk (both in terms of volatility and risk of complete loss), and that borrowing money to invest is almost always unwise, since the interest paid directly reduces the return without reducing the risk.

D Stanley
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  • +1 However, in my mind, save and invest are synonymous. Some of your savings should be liquid, but the portions of your savings that you don't need for an emergency fund can be tied up in less liquid and riskier investments. Even a savings account is an investment (albeit a lower risk and a lower return). – NL - Apologize to Monica Aug 01 '17 at 19:50
  • @NathanL Granted it's a thin difference, but it seemed to help distinguish the options in the question (investment-grade return vs 2% interest earned). – D Stanley Aug 01 '17 at 19:54
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You're ignoring inflation. Even if we assume the ECB sticks to its 2% inflation target, and your salary only rises in line with inflation, you will be saving considerably more in forty years' time than you are today. In fact, an interest rate of 2% and an inflation rate of 2% make the sums exceptionally easy. You need to save €25,000 per year in 2057 euros to be a millionaire by 2057, which is €11,322 in 2017 euros. Challenging, but achievable. Of course, you'll only be a millionaire in 2057 euros, which will be worth less than half as much as a euro is worth right now.

Mike Scott
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  • My spreadsheet should be wrong so, I tried some test but I'm not good with that.. 2057 is too late in my opinion, I will just try to invest asap – Valentin Silvestre Aug 01 '17 at 11:32
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If your take-home salary after taxes etc is 35K / year, and you say you will be able to save at most 40% of that, you will need to find something that pays 2.75% to reach one million in 40 years*.

However, these numbers can chance dramatically depending on your specific circumstances. If you're just starting your career, 40 years of saving is not impossible. If you're in the middle or nearing the end, you will have dramatically less time to achieve your goals.

*40% of 35000 is 14000 saved per year, at an interest of 2.75% compounded annually, you will reach 1000000 after roughly 40 years.

MPF
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