How to Make 1 Million Dollars by Saving

According to several surveys in the US, most millionaires are not made by winning the lottery, a brilliant business idea or through inheritance. Most do it the steady way via disciplined savings and investing. But how hard is it to achieve a million this way?

 

How to Make 1 Million Dollars by Saving?


Let's say you start with nothing in the bank and put away $1,000 a month. With income increases and bonuses, let's assume you add to the savings at the rate of 5% a year. After one year, you would be putting away an average of $1,050 a month. With an average return of 8% per annum, you would hit the $1 million mark in a little under 22 years.


But then, here's the bad news. In 22 years, your million would be worth about $340,000, given an inflation rate of 5% per year.


The good news is, given that the assumptions are right, your second million will be much easier to achieve. If the rate of savings remains, the second million would be made in another seven years. The third million, you would make in another four years.


Even if you stop contributing after you reach the first million, the second million would be made in nine years, less than half the time it took to accumulate the first million.
 

Assume that you have nothing in your savings account. If you are 25 years old, you need to save $286 per month to get to $1 million mark at the age of 65 with 8 percent annual return.

 

For those who are 35 years of age, the monthly savings needed would increase to $671 to achieve $1 million at age 65, given the same annual return.

 

If you just celebrated your 45 year-old birthday and just started to save, you need $1,698 per month consistently to get you to $1 million when you retire at age 65 with an investment tool that give you 8 percent annual return.

 

At age 55, you need to put in a lot more effort if you were to invest in an 8-percent return tool and achieve the same result at age 65. Your monthly saving figure is $5,466.

 

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