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FOOL'S EYE VIEW
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Despite the fact that, here in the UK, we enjoy some of the highest living standards in the world, countless people still yearn to be rich. Perhaps it's the lure of the grand home, flash car and Jetset lifestyle that makes people want to be a millionaire? Here are five ways to hit the million mark - some easier than others! 1. The National Lottery Imagine: you're sitting on the sofa one Wednesday or Saturday evening and your jaw drops as all six of your Lotto numbers roll out of the machine. You've done it - you've beaten odds of nearly fourteen million to one to hit the jackpot! It's at this point that you encounter two problems. Firstly, thanks to falling ticket sales, jackpots aren't what they used to be so, even if you do match all six balls, you might not scoop a million. Secondly, you need to examine the numbers you picked. If you mostly picked numbers under 32, it's very likely that you'll be sharing your prize with several other winners. That's because millions of punters use family birthdays to choose their numbers, so it's bad news if all six numbers are between 1 and 31! On the other hand, Camelot has created around 1,500 millionaires since November 1994 and given away over £20 billion in prizes. But, because it only pays back half of what we pay in, you could argue that we've lost £20 billion instead!!! Give the National Lottery and all its games a miss. For 99.995% of players, the big win is nothing but a pipe dream. 2. Premium Bonds Every month, National Savings & Investments pays out over half a million prizes - ranging from £50 to £1m - to holders of Premium Bonds. There are around 23 billion Premium Bonds in total, and each Bond has an equal chance of winning. So, if you own a single bond, the chance of ERNIE (the Electronic Random Number Indicator Equipment) choosing you as the lucky winner each month is 1 in 23 billion. However, if you have the maximum £30,000 invested, the odds of winning the jackpot fall to around 1 in 770,000 per draw. What's more, with average luck, you stand to win around twelve prizes per year from your thity grand, giving you an annual tax-free return of 2.15% (rising to 2.4% in March). The important point to note is that, unlike National Lottery punters, Premium Bond holders don't lose their capital after every draw. So, although winning a million with Premium Bonds is still an extreme long shot, Premium Bonds are a massively better bet than playing the Lotto! 3. Property In just about every newspaper and magazine, I see ads for seminars on becoming a property millionaire within two years. However, I suspect that, instead of learning the "inside secrets of property investing", most of these 'trainee property developers' come away £2,000+ worse off. And that's just from the fees they pay to learn these so-called secrets! Then again, how long would it take the average UK house to reach a million? The average house price, according to the Halifax House Price Index, is currently £142,333. Growing at the long-term average of 8.5% a year, it would take twenty-four years for the average UK home to be worth a million. Of course, thanks to inflation (rising prices), a million will buy a lot less in 24 years, but it's fun to dream! (If you'd like to learn more about serious property investing, visit our Property - Markets and Trends and Property Investing - Practical discussion boards). 4. Cash The best rate at present on a tax-free cash mini-ISA (into which you can save a maximum of £3,000 a year) is 4.35% from Intelligent Finance. Although the chancellor has announced plans to reduce this limit to £1,000 from the 2006/07 tax year, let's assume that the Mirror's campaign to keep the £3,000 limit succeeds. So, how long would it take to make a million by saving £250 a month in a tax-free cash mini-ISA that earns 4.35%? Sadly, if you started at sixteen (the minimum age for ISA holders), you'd be celebrating your eightieth birthday before your pot reached £1,006,377. And, after sixty-four years of saving, you might just end up blowing the money on nursing-home fees. Damn! 5. Shares Investing is a great way to become wealthier, because the stock market is very rewarding over the long term. It's true that the UK stock market fell for three years in a row from 2000 to 2002 but, after a shaky start, it did very nicely last year. In fact, since 1945, the average annual return from the UK stock market comes to 12.4%, with dividends reinvested. Here's how long it would take to make at least a million from shares, assuming similar future growth:£250 a month: £1,060,550 after 32 years
£500 a month: £1,025,872 after 26 years
£1,000 a month: £1,097,989 after 21 years
£2,000 a month: £1,132,727 after 16 years.
Of course, no-one can predict what the stock market will do from one year to the next, but one thing's for sure: it reserves its greatest rewards for the patient few!
Finally, here's the bad news: being a millionaire isn't what it used to be. These days, a low-risk return of, say, 5% a year will give you a taxable income of £50,000 on a million smackers. After tax, this falls to roughly £3,000 a month. So, it's not possible to live like a celebrity without spending your capital or taking some risks with your money. So much for being a millionaire!