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Making millions is easier than you may think

Are you being taken advantage of (ripped off, cheated, scammed, defrauded) by companies and businesses that see you as nothing more than a fistful of dollars? In fact, many companies see you as years and years of handfuls of cash, and they want as much of it from you as they can get.

For many service members, the military was their first real paying job. And many used the newfound income to buy a car or motorcycle or big-screen TV.

How about you? Did you get a credit card or five and start burning up the credit limits? Are you trying to commit financial and credit suicide?

The banks, stores and vehicle dealers are not your friends. They’re not all your enemy, either, but some of them are. Selling money at a low interest rate, then changing it to a high rate is not the act of a friend (credit cards). Selling money at a stupid-high rate is the act of an enemy (payday loans). Selling you a car that’s more expensive than you can afford is good for auto dealerships, but what about being good for you? Where I live, no one is impressed by a $73,000 BMW. And no one cares if you drive a 10-year-old Ford Escort.

It’s time to get real and learn how little it takes to become a multimillionaire.

Let’s look at the lives of two hypothetical recruits fresh out of high school, Joe and Jane. Joe really likes to have a good time. He likes to party and buy drinks for his buddies. He spends wildly on his dates. He loves his new Nissan 350Z, and his entertainment center is killer. Life is good. See Joe spend. Spend Joey, spend!

Jane lets guys like Joe buy her drinks (but not too many). She picked up a reliable 5-year-old car, and she lives on base. She sends money home to her mom and saves $300 a month and invests it in the stock market.

Joe is young and isn’t used to paying his bills on time; his credit cards quickly zoom to 25 percent interest rates. Now, Joe can’t even make his minimum payments. He takes out payday loans, but it is a losing game. In the end, Joe quits paying on his credit cards, and two of them sue him. His car is repossessed, and he files for bankruptcy at age 20. He needs a car, but the finance company wants 25 percent down and 25 percent interest. So he buys a 10-year-old Ford Escort and borrows his buddy’s car when he has a date.

At age 22, Jane stops saving her $300 each month and forgets about it when she leaves the service and enters into civilian life.

Joe has learned his lesson: Never spend more than you make. And so Joe, also now a civilian, buys only what he can afford with cash. Joe has no credit and so never buys a home. But he’s happy. At least he is not in debt, and he has pretty much all he could ask for. And he spends everything he makes.

Jane gets married. Because she took care of her credit, she can buy a home when she’s 25. She and her hubby raise a family and struggle through life. The last child finishes college when she’s 55. Thank goodness, the house is paid for, and it is worth $500,000 after all those years. Now, they can start saving for their retirement, because the home isn’t enough to retire on.

Then, she remembers ... whatever happened to that money she invested so long ago? She calls up the brokerage and asks how her investments did.

A bored-sounding guy types into his keyboard and says, “Oh, you did about as well as the rest of the market, nothing special. About 12 percent average.”

Jane is disappointed. She wanted to treat herself to a new car.

“Well, how much is my investment worth?” she asks.

He replies, “You started with a total investment of $14,400. Your account is worth about a million dollars now. The way it’s going, your money will double again in six more years.”

Jane is too tough to faint. She decides to buy a used car just one last time.

And while that would be a great place to end this article, let’s carry it two steps further. What would have happened if Jane had continued to invest $300 each month? Assuming the stock market’s rate of return stays the same as it has for the last 80 years — about 12 percent per year on average — we can calculate the results.

Jane would have invested a total of $133,200. After 37 years, Jane’s investments would have an accumulated total value of $2.5 million, doubling every six years at 12 percent interest. Had Jane done a little better than the market — say 16 percent, she would have earned well over $8 million.

Dave Peters is a semiretired loan officer and credit-repair specialist. He is a trustee of the nonprofit organization Credit Learning Systems, which teaches college students about credit and debt. He is the author of the book “How Credit REALLY Works” and is a guest on radio shows nationwide. E-mail him at creditmatters@atpco.com.