I’m going to tell you exactly how long it will take you to become a millionaire if you save just $1 a day. You might think that it’s going to take you one million days, and you would be right, but considering the fact that the average human only lives less than 30,000 days, you would actually never see a million dollars.
But don’t despair, by regularly investing your money, you have the potential to become a millionaire in your lifetime.
Growth of Saving Different Amounts
Here is a chart of how much you have saved on the left versus the number of years along the bottom. Assuming you invest $1 a day and earn a 5% rate of return on your investment, after 50 years, you have about $76,000 which is not too bad considering you would have only put aside $18,250.
What we’re looking for here is a rate of return that crosses the $1,000,000 line. The first time we see that happen when we save $1 a day is with a 12.5% rate of return just before 50 years time has passed.
As the rate of return increases, so does the point in time that a million dollars is achieved. By saving $1/day, a 15% rate of return would make you a millionaire in right around 42 years.
Now that’s great and all, but what if you double your savings and save $2 a day? Let’s see how this chart changes, and you’ll notice that there’s a big difference.
Not only do we see more lines crossing the million dollar threshold, but we also reach a million dollars sooner.
What if you save $5 per day?
And as we keep increasing the amount of money you save per day all the way up to $10 which is equal to $300 a month or $3,650 per year, you’ll notice that almost all of the rate of return curves cross the million dollar line within 50 years time.
Let’s keep increasing the amount of savings to $16 a day which is equal to $500 a month or $6,000 a year.
This amount is equal to the maximum that you can contribute to an IRA in a year.
If we assume the average rate of return for the US stock market which has been 10% for the last century, you will have a million dollars in about 30 years time.
Bump that up to $25 a day, and you’ll have a million dollars within 26 years.
The max 401k contribution right now is $19,500 which is equal to $53 a day, and with that savings amount at a 10% rate of return, you’ll be a millionaire within 20 years.
And just for fun, let’s say you are in a position where you are able to save $100 a day. Depending on the rate of return, you’ll have a cool million bucks in your pocket as soon as 12 years from now, but definitely within 18 years assuming a conservative 5% return.
Remember, just like in the first example, here you will have only set aside $365,000 out of your pocket, but due to the power of compound interest, you’re entire investment is worth much more than that.
Depending on the rate of return that your investment sees and how much you save per day, it’s definitely achievable to save one million dollars. What helps the most, as always with investing, is time. The earlier you start, the more time your investment has to grow.