A COASTGUARD officer says he’s has become a self-made millionaire thanks to a simple savings trick.
Steve has been putting away an equal regular amount each month, regardless of how stocks or other securities are performing.
The 44-year-old warrant officer has now cross the $1 million in his Thrift Saving Plan (TSP) for US Federal Employees.
He has managed to reach the landmark through what’s called cost averaging.
That entails investing an equal sum every month, which means buying more shares at lower prices and fewer ones at higher prices.
The tactic avoids poorly timed lump sum investments at a potentially higher price and can reduce the impact of price volatility.
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Steve – whose last name wasn’t disclosed – told Military Times that it"will be the winner in the long run, or at least it has been for me".
Steve said that he has made sure during his entire career that he has made TSP contribution first, before anything else.
His strategy has been to invest in various funds in the TSP, but he’s stayed completely out of international funds.
He has also long encouraged other service members to start investing early in their TSP.
“I’m a big proponent of the TSP, to the point where the crew hates standing watch with me because they get four hours of TSP talk, whether they want it or not,” he said.
He attributes his success to his parents who encouraged him to start saving to accumulate six months of savings when he enlisted aged 18
“Then it’s like a drug. I got addicted to saving. What I owe them is, I’ll retire in four years, and I’ll go back to work if I want.”
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Gerri Walsh, president of the FINRA Investor Education Foundation, said taking the long term view can help ride out market volatility.
“One of the best ways to save for retirement is saving over a long time, and to continue, even if you start small,” she said.
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“Start small and dream big, because as those contributions accumulate and compound and are matched, there are opportunities for growth.
“The most important thing is sometimes the hardest thing to do, and that is to step back, take a deep breath, and look rationally at what you have and what your balance sheet looks like for your family.”
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