Do you think becoming a millionaire is impossible for you? Think again. Even those with a modest income can become millionaires if they are diligent about saving, managing their spending, and committing to it long enough. Here are some examples of how to become a millionaire through consistent saving habits.
The key factors affecting millionaire status
The most significant factors that work against your status as a millionaire are debt and time. It is possible to become a millionaire regardless of your situation, as long as you can keep these two factors in your favor. If you can avoid consumer debt and start investing every month when you’re in your twenties or thirties, you can become a millionaire by the time you retire.
Examples of millionaire scenarios
According to a Vanguard calculation, a portfolio consisting of 100% stocks grew at an average of more than 10.2% per year between 1926 and 2019. Using this historical average, you can calculate how long it will take to become a millionaire.
If you are starting from scratch and investing in a tax-advantaged account, such as a 401(k) through your employer, assuming a 10% long-term return, here’s how much you’ll need to save to create a $1 million portfolio.
If you invested $50 a month
Setting aside $50 every month doesn’t seem like a huge sacrifice, but it’s enough to become a millionaire if you start investing early enough. At this rate, you would reach $1 million in about 54 years. However, 54 years is a long time, especially if you start late, so you might want to consider larger monthly contributions.
If you invested $100 a month
By investing $100 a month, you will reduce the time you need by almost seven years. If you start saving at age 25, you will be a millionaire sometime after your 71st birthday.
If you invested $200 a month
By investing $200 a month for 40 years, you will become a millionaire. Compared to those who save only $50 a month, you are likely to reach millionaire status nearly 15 years earlier.
If you invested $400 a month
You will become a millionaire in 33 years if you invest $400 a month. This means that if you are currently 25, you could be a millionaire by the age of 58, allowing you to retire earlier than you initially planned.
If you invested $750 a month
By investing $750 a month for more than 26 years, you will become a millionaire. If you are 25 today, you could have a million dollars by your 52nd birthday, even after contributing less than $250,000 from your own pocket.
If you invested $1,000 a month
It will take less than 24 years to reach $1 million when you invest $1,000 a month. If you have a child today, you will become a millionaire after your child graduates from college.
If you invested $1,500 a month
Setting aside $1,500 a month is a good savings goal. At this rate, you will reach millionaire status in less than 20 years. This means you will achieve this status about 34 years earlier than those who save only $50 a month.
If you invested $2,000 a month
Can you imagine becoming a millionaire in just 18 years? If you can save $2,000 a month, that’s what can happen. If you have a newborn today, you could gather a million dollars before your child graduates from high school.
How to
Increase Your Savings
Thinking about becoming a millionaire is exciting, but it may leave you wondering if it’s possible to save $2,000 a month. It may be easier said than done, but you can increase your savings by working on boosting your income and reducing expenses. If you don’t enjoy lavish luxuries and avoid consumer debt, you should be able to save more as you progress in your career.
Employer-Sponsored Retirement Plans
Many companies offer a 401(k) retirement plan that includes matching contributions up to a certain percentage of the amount you contribute. For example, if you contribute 4% of your income and your employer has a 4% match, your effective savings rate is 8%. For someone earning $800 a week, that means over $250 in savings per month. Take advantage of this free money to double your savings rate and reach your goal of becoming a millionaire sooner.
Individual Retirement Accounts
Not all employers offer 401(k) matching. There are contribution limits for IRA accounts based on your income level, and you should actually aim to maximize your contributions up to the legal limit.
Conclusion
The important thing is that saving and investing are important goals for everyone. Regardless of how much money you have at the end of the month, there’s no excuse for not saving for your future. If you want to become a millionaire, you need to take responsibility for your financial future by saving money each month, and your goal will become a reality.
Frequently Asked Questions (FAQs)
What is a millionaire?
A millionaire is a person whose net worth is a million dollars or more. This means that the total value of their assets minus liabilities is at least one million dollars.
How will my retirement money grow?
The growth rate of your investments depends on a number of factors, including market conditions, your portfolio’s asset allocation, and the time you have to grow your money. Over the long term, the S&P 500 – the benchmark for stock market performance – has produced an average annual return of about 10%. If your portfolio is modeled after the S&P 500, you are likely to achieve a similar rate of return over decades of investing, although many years will be more or less than this amount.
Was this page helpful?
Thank you for your feedback! Please let us know why.
Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we fact-check and maintain the accuracy, reliability, and quality of our content.
Vanguard. “Vanguard Portfolio Allocation Models.”
Source: https://www.thebalancemoney.com/how-to-be-a-millionaire-453692
Leave a Reply