Wondering how to save money? Start by creating a budget and cutting back on unnecessary expenses, then set up an automated savings plan to help you reach your goal of amassing a million dollars. Here’s my story and how I did it…
I reached financial independence at the age of 30 after saving over a million dollars in 5 years. I decided to outline the variables and scenarios that impact how fast you can save $1 million because I get asked how I did it and how someone else can too. It is possible to save $1 million over a short period of time if you have the right strategies in place.
My $1 million savings goal wasn’t far off from the amount of money I would need to retire early.
While your number will likely be different than mine (a simple calculation is to use 25x your annual expenses to determine how much you will need to retire), I used $1 million as the example in this post because it is a nice big round number, the goal I picked when I started saving, and who doesn’t want to be a millionaire? It’s possible to reach this milestone with dedication and a good savings plan.
How Long Does it Take to Save $1 Million Dollars?
Depending on how much money you make, how much you save, and how much your investment grows. Your ability to manage your finances will determine the amount of money you have saved for retirement.
Here are the variables that matter most:
- Income : How much money you are making
- Expenses : How much money you are spending
- Savings : How much money you are saving
- Savings Rate : = Savings divided by income (check out my savings rate calculator)
- How much your investments grow each year.
As you can see from my situation, the higher your compounding rate, the faster you will reach 1 million. You should consider other factors that can lead to achieving this goal, such as investing in assets with diverse returns.
Time to Save $1 Million Calculator
To find out how long it will take you to save $1 million dollars, use this calculator. You can set a goal and create a plan to reach it if you know how long it will take you to save $1 million.
You’ll save $1 million in: 44.60 years
How Fast Can You Become a Millionaire?
There is a simple example of using these variables.
He saves 10% of his income and 20% of his income because he is making $50,000 per year after taxes and his annual expenses are $40,000. He is able to save money each year to help him reach his financial goals.
That’s a solid savings rate, but given how much money Trevor is making, it will still take him 30 years with his investments compounding 7% each year by investing in stock market index funds.
Your compounding rate has a huge impact on how fast your money will grow and for these examples, I have chosen 7% because it is a more realistic and likely sustainable investment growth rate than the 12%+ we have seen over the past few years. It’s important to remember that compounding is a long-term strategy and you won’t see the full effects overnight – but with patience and consistency, the rewards.
The higher your savings rate, the faster you will be able to retire.
How To Save a Million Dollars with a 50K Salary
As you can see in the chart below, the savings rate of Trevor has a big impact on how quickly he can reach $1 million. He will reach his goal of $1 million quicker if he increases his savings rate.
The difference between saving 10% of his income and reaching $1 million in 39 years is larger than the difference between saving 50% of his income and doing it in 19 years. You can reach your financial goals in half the time if you increase the amount of savings.
Have you ever thought about how much money you should save or how your savings rate impacts the growth of your investments?
I first did this calculation back in 2011 when I started my savings journey and quickly realized that making $50,000 after taxes was going to be enough to get me to $1 million in 19 years at a 50% savings rate, but I would need to make a lot more money to do it in less than 10 years (which was my goal).
How to Save a Million Dollars with a 100k Salary
To see how long it would take to save $1 million, I ran the same numbers with $100,000 after-tax income. It would take 11 years to save $1 million with a $100,000 after-tax income. Here is what I found.
If I could make $100,000 after taxes and save 10% of my income, it would take me 30 years to reach $1 million, but if I could save 50%, I could reach $1 million in 13 years. That is a huge difference. The impact that this change has had is worth noting.
My goal to save at least $1 million in less than 10 years also made an appearance at the $100,000 after taxes income level, but I would need to have a savings rate of at least 70% in order to make it possible. I plan on setting up an automated savings plan and tracking my progress along the way to ensure that I am staying on track.
I am able to balance my happiness per dollar ratio at this spending level, but it is possible that I could live on $30,000 or less. I strive to save as much of my income as possible in order to be able to live within my budget. It would be difficult to live in Chicago on $30,000.
$100,000 after taxes isn’t enough to get me there. Let’s take 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 You can reach $1 million in 12 years if you increase your savings rate from 10% to 15%.
Saving $1 million in 5 years is a possibility if you can live on $40,000 per year and invest the difference.
How to Save a Million Dollars with a 200K Salary
Check out how fast you can save $1 million dollars if you are making $200,000 after taxes:
While $200,000 in after-tax income is a lot of money, if your primary focus is to save as much money as possible over a short period of time, then you can dramatically shorten not only the number of years it will take you to save $1 million, but also retire a lot earlier.
If you haven’t already, definitely check out my 1% early retirement strategy.
How I Saved a Million Dollars in 5 years
It will take you 5 years to save $1 million, but I want to show you the investments that helped me get there. I was able to achieve these savings in a relatively short period of time by carefully managing my investments and diversifying my portfolio.
While I am a huge advocate of index fund investing and recommend that most people invest for the long term using index funds, between 2010 and 2015, I was also investing in individual companies that I believe in, like Amazon, which increased an insane amount in value over that time period. I’m happy that my strategy paid off, but I know that investing too much in individual stocks can be risky.
If you are new to investing, I recommend that you invest less than 10% of your portfolio in individual stocks, because the total percentage of stocks as a percentage of my overall portfolio has gradually increased to this level. I feel confident in the long-term prospects of these stocks, even though I understand that this is a higher level of risk, but I have done the research to back up my decisions.
I believe in the long-term potential of individual companies that I have invested in. In the years to come, I am confident that these investments will bear fruit.
Get an Education in Investing
FYI, here are the best two books I’ve ever read on index fund investing that you should definitely check out to get more background on the strategy:
- The Bogleheads’ Guide to Investing
- The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life
I wondered if I got lucky over the five year period. I did get lucky over the course of five years. There is no way anyone can predict the stock market returns of the future and I started investing at a time when the market was low and it has grown considerably over the past 7 years. If you invest at the right time, the stock market can be a great source of long-term wealth. The US stock market grew until this day and was on a tear during this time. In recent years, it has been one of the most successful markets for investors to put their money into.
Build Your Investment Portfolio
Many people who have kept their cash on the sidelines have been asking if stocks are too expensive, but have missed out on big gains while doing so. Even if stocks are too expensive now, they may not stay that way in the future. I am almost entirely invested in stocks for the long haul and I have been happy to see how much more my portfolio has grown over the past 2 years.
If you can take advantage of luck, your investments will continue to grow over the long-term, even if you don’t get lucky. You can make the most of your investments if you do your research, create a plan and stick to it. I was able to go from $2.26 to over $1 million saved in 5 years with my investments back in the day. I have come a long way since then.
Invest as Much Income as Possible
The primary reason I was side hustling so hard was because I saved and invested so much. Since making this commitment, I have been able to grow my savings and investments, and I am looking forward to the future. Note that I didn’t just save the money in a savings account (where returns are often really low and you are likely to lose money to inflation), I put a lot of money into the stock market. I hope my investments pay off in the long run.
Some of my investments were pre-tax, while others were post-tax and investment accounts. My savings rate fluctuated throughout that period, sometimes going as high as 80%, but my total savings rate was closer to 50%. I was able to build up my emergency fund and invest in other financial goals, such as retirement savings. I calculate my savings rate as a percentage before-tax, but you can also do it after-tax. My savings rate would be closer to 80% if I did it after taxes. I was able to save more than I thought.
The Vanguard Total Stock Market Index Fund returns were so high that they were much higher than the average used in the calculation examples. This means that the fund’s returns would have been higher than the average. The stock market returns over the past 100 years have been average, but an average return of 13.05% is insane. It’s no wonder that investors want to invest in stocks that have done well.
Investing in the Total International Stock Index yielded no gains. It may be better to invest in mutual funds that have a higher potential for returns. I invested in this fund to get more diversified in my portfolio. The fund is helping me to build a diversified portfolio and generate long-term returns. Over the past two years, the current share price of $29.92 has gone up in value. The market volatility that has occurred during this same period is impressive.
Invest in Stocks with Growth Potential
Amazon and Facebook went on a tear during this period. The technology sector was the beneficiary of the bull market in 2020, with many of its giants seeing huge gains. Bythe end of 2015, the value of Amazon had increased by 275%. The rise in Amazon’s stock price has been good for investors. It started at $26.62 and ended at $104.66 with Facebook stock. The potential of investing in Facebook stock over a long period is shown in the 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 888-666-1846 I continued to contribute to most of the investments during this period.
By the end of 2015, the value of Amazon had increased by 275%. Amazon is one of the most valuable companies in the world. It started at $26.62 and ended at $104.66, a 293% increase. Since then, it has risen and is now at an all-time high. I continued to contribute to most of the investments during this period. A final portfolio value of $1,248,973 was achieved by combining all of the investments that I invested during this period. The results of this investment have been very encouraging and I am looking forward to seeing how it will grow in the future.
I was able to make half a million dollars in investment gains over a 5 year period. I’m very proud of this accomplishment and I’m looking forward to improving my returns in the future. The past 2 years have been strong so my investments continue to grow and I will be able to live off 4% of the portfolio each year for the rest of my life. I’m monitoring the markets and making small adjustments to my portfolio to ensure that I can continue to grow it while preserving my hard earned savings. Even during the years when my investments have grown by 15%+, I can keep some of my investment gains in my portfolio because I will be able to live off the 4%+ inflation. I need to make sure that my investments are diversified and that I keep an eye on my portfolio.
5 Tips How To Save a Million Dollars Fast
These are the best ways to save money.
1. Track Everything
I use the free retirement planner in the Personal Capital app to track my investment portfolio progress and make adjustments. The projected glide path of my investments is to the right. This plan will allow me to achieve my financial goals.
Start tracking your income, expenses, savings rate, and investing performance with the Free Net-Worth Tracker. Personal Capital will help you visualize your financial data in an easy to understand dashboard, giving you a better understanding of your overall financial situation.
I do it every morning, but you can do it as often as you please. It’s a great way to start your day. They will email you weekly updates on your progress once you sign up. You can see your progress online at any time.
With Personal Capital, you can see your net worth, analyze investments, and discover any hidden fees, as well as set spending and saving goals. Personal Capital can be used to take control of your finances and make smart financial decisions.
2. Make More Money
If you want to take advantage of the fuel of compounding, try to make as much money as you can and invest as early as possible. You can maximize the power of compounding if you start making smart investments now. $1 invested at 25 is worth more than $1 invested at 35. It’s a great way to grow wealth over time. The more money you can invest, the more it will grow. You are setting yourself up for success by investing now.
If you haven’t asked your boss for a raise, then use this strategy to get a raise or get a new job. Start developing the best skills that lead to more money and make you more marketable.
If you already have really valuable skills launch a consulting company or start side hustling.
3. Invest More Money
You are saving at least 12% more each year if you increase your savings rate 1% every 30 days. If you can afford to increase your savings rate further, you should start small with a 1% increase. By increasing your savings rate 1% every 30 days, you aren’t likely to feel it in your everyday finances. The rewards you get at the end of that journey will be well worth the effort you put in.
If you increase your savings rate 1% every 30 days, you will be saving 42% in 3 years. This will help you reach your financial goals by allowing you to save a significant amount of money over the course of 3 years. This will make a huge difference in how quickly you can retire and how much you will save.
Check out this calculator I built to see how quickly you can retire.
4. Keep At It
Don’t look for a quick return and don’t day trade stocks. Look for investments that you can hold for the long-term and keep an eye on their progress. Even though the market will go up and down unexpectedly, stick with it and invest as much as you can. Over time, the growth will compound. There will be an unprecedented level of opportunity for those who are able to take advantage of it.
5. Don’t Lose Sight of The Big Picture
Money is not the goal, time is. One of my biggest money mistakes I’ve made it valuing money above all else. I’m all about trying to make as much money as possible, but remember why you’re doing it in the first place. Life > Money
To learn the exact steps that I took to become I millionaire at 30 and the steps you can take, check out my book Financial Freedom: A The path to all the money you will ever need is proven. Start your journey today by reading Proven Path to All the Money You Will.
LEARN MORE: How Much Should I Have In Savings?