You CAN Save One Million Dollars!
Saving one million dollars can be done. This might come as a shock to many and a lot of people might think that figure is only achievable by winning the lottery, but I can assure you that it is achievable. All it takes is some planning and commitment… and a little bit of magic called compounding.
Outlined below are some key tips on how to save $1,000,000:
Start with your focus. For this example, it’s one million bucks.
Frequency – Regular deposits are recommended straight from your pay. What you don’t see you don’t miss.
Amount – Minimum 10% of monthly net income is recommended.
Rate – Choose investments that provide at least a 6-8%pa rate of return.
Type – Try a high interest savings account to get started, then perhaps managed funds once you have saved enough for the minimum investment. As your balance grows, we will look at other assets to spread your investment. If you’re taking advantage of the low tax applied to super, in addition to the superannuation guarantee, you may want to salary sacrifice to your super fund – as long as you don’t exceed the concessional contributions cap.
Risk – Remember: high returns generally mean high risk. On the other hand, being too careful can slow progress. Everyone has a different risk tolerance which depends on age, personality and circumstances.
Age – Obviously it’s best to begin as early as possible, but you can still save a substantial amount even if you start in your mid-late thirties.
How many years to save $1 million
Let’s start with a savings balance of $5,000. This is how long it will take to reach the million dollar mark at different contribution amounts and earnings rates:
|Monthly Contribution||Years @ 4%pa interest||Years @ 6%pa interest||Years @ 8%pa interest|
Obviously, the earlier you start saving, the smaller the contribution is needed. You can accelerate your contribution rate as your income increases. Savvy savers who pay a mortgage off early can accelerate their program considerably by directing the amount formerly devoted to the mortgage payment into savings.
And what about money you receive along the way? If you receive an inheritance of say, $100,000 (assuming an annual return of 6%), the $1 million mark can be reached in just 30 years contributing only $400 per month.
Regular investing is likened to building a “saving muscle.” You grow accustomed to putting away this money over the years and are able to increase the amount as you would increase an exercise regimen. Eventually, it becomes habit, and the payoff can be enormous at the end. Like achieving a fit and healthy body, building your saving muscle results in a healthy financial outlook.
Being a millionaire may seem like an unattainable dream, but with the right amount of planning and diligence, you can save $1,000,000. Want a hand? We’re here to help:)
Notes: taxation and inflation have not been taken into account in these calculations. Calculation based on achieving $1 million in today’s dollars.
The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
Braeside Wealth and its advisers are Authorised Representatives of Fortnum Private Wealth LTD ABN 54 139 889 535 AFSL 357306