How to Be a Millionaire, Saving Very Little per Month

Do you think being a millionaire is out of the
question for you?
Think again. If you avoid consumer debt and start
investing when you’re in your twenties or thirties,
you can be a millionaire.
Here’s how.
You Can Become a Millionaire: The Beginning
Let’s assume you have $0 in your investment
account right now. You have no debt, but you
haven’t saved anything, either.
Let’s assume you put your investments into a tax –
deferred account, such as a 401 (k ).
Let’s also assume that your investments, over the
long haul, will grow at an annualized average rate
of 7 percent. (Investing legend Warren Buffet
predicts the long-term annualized return of the
U.S. stock market in the early-to-mid 21st century
will be 7 percent.)
Remember: this is a very, very long-term average –
over the span of 20 years or more. In any given
year, your investments might be up or down.
Don’t focus on the short-term. One year – or three
years, or five years – is small-scale when you’re
talking about a lifetime portfolio.
With those three assumptions in mind – you’re
starting at $0, you’re investing in a tax – deferred
account, and you’ll get a 7 percent return over the
long haul. Let’s look at how much you need to
invest to create a $1 million portfolio.*
The Math of Becoming a Millionaire
If You Save: $100 per month
You’ll Be a Millionaire In: 58 years and 6 months.
That’s a long time – if you’re 25 now, you’ll be 83
by the time you’re a millionaire – so I recommend
saving more.
If You Save: $200 per month
You’ll Be a Millionaire In: 48 years and 10 months.
Notice how simply saving an extra $100 per month
($200/mo instead of $100/mo) shaves a decade off
the time it takes you to become a millionaire.
If You Save: $400 per month
You’ll Be a Millionaire In: 39 years and 4 months.
That means if you’re 25 now, you’ll be a
millionaire at age 64 – in time for retirement.
If You Save: $750 per month
You’ll Be a Millionaire In: 31 years, 1 month. If
you’re 25 now, you’ll be a millionaire at age 56.
Did someone say ” early retirement?”
If You Save: $1,000 per month
You’ll Be a Millionaire In: 27 years and 6 months. If
you have a baby today, you’ll be a millionaire by
the time you dance at your child’s wedding — or
maybe by the time your grandchild is born.
If You Save: $1,500 per month
You’ll Be a Millionaire In: 22 years and 9 months.
What a huge improvement over the “58 years” we
were quoting at the $100/month savings rate!
If You Save: $2,000 per month
You’ll Be a Millionaire In: 19 years and 7 months.
Have a baby today, and you’ll be a millionaire
when he or she is in college.
If You Save: $2,500 per month
You’ll Be a Millionaire In: 17 years and 3 months.
Have a baby today, and you’ll be a millionaire
before your kid is out of the house. If you’re
currently 25 years old, you’ll be a millionaire by
age 42.
Want to run your own calculations? There are
many online calculators can help you.
How Can I Save That Much Money?
I’m guessing your next question is something along
the lines of “How on earth am I supposed to save
$2,500 per month?”
I can boil that answer down to four words: Earn
more. Spend less.
Here are some resources to help you earn more:
Here are some resources to help you spend less:
One final note:
If your employer offers a 401(k) match, take full
advantage of it. Otherwise, you’re leaving “free
money” sitting on the table.
Conversely, if your employer doesn’t offer a 401(k)
match, or if you’re self-employed (like I am), take
the reins and start heavily investing your
paychecks into tax-advantaged accounts like
Traditional and Roth IRAs and Individual 401(k)’s.
Remember: if your job doesn’t give you retirement
benefits, that isn’t an excuse to forgo saving. Take
responsibility for your financial future.