Do you want to save a million dollars? Do you want to know how long it will take you. I asked a financial advisor once and got the following response, “It depends.” If you really want to save a million dollars it really does depend on a lot of factors.
Wouldn’t it be nice if you could save a million dollars by just taking a number of dollars and putting them in the bank. I guess you could, but but when do you want to get to that million dollar mark? Is it by age 65 when you want to retire or by age 45 so you can travel the world?
Here are a few things to consider when setting your goal to save a million dollars.
What is your age now and when do you want to make it to a million. The amount you would need to save if you are 20 and want to have it by 65 will be drastically different than the person who is already 35 and want to have a million by 55. Forty-five years of savings versus 20 years of savings makes a big difference in the monthly amount you need to sock away.
Interest Rate or Return
The amount of return or interest you make on the money has a direct compounding effect on the amount of time and money it will take to get to your goal of having a million dollars. Putting it in the bank and having a guaranteed rate of return may also insure that you don’t get to your savings goal. Sometimes taking a little more risk and finding a higher rate of return will make the difference in succeeding or failing at saving a million.
How much do you have to start with. This is a key factor in jump starting your investment. The more you have to put towards your goal at the start the sooner you will accomplish the objective. Think of how much you could set aside now, if you haven’t already, to get started with.
In order to save a million dollars you need to know it’s a long term goal. To succeed you’ll have to create a monthly budget to make sure you hit the mark. It will take a lot of focus on the goal to continue to save. At the start it will not feel like you are making any progress, but with time as you see the fund balance grow and compound the goal will become more and more realistic.
Save a Million Dollars – Calculate it
Here’s a little calculator to help you get started in figuring out how much you need to save each year to make it to a million. Just enter the amount you are starting with, and the amount you want in the future. Then enter how many years you have to save and the rate of return on your savings. To keep it simple you could leave the annual savings increase and tax brackets empty.
Saving a million dollars is not an easy task, especially when you factor in there will be inflation, which makes the value of your money go down, and taxes that you’ll have to pay on your earnings. When making the decision on the best way to save your million dollars you might want to sit down with a financial advisor to discuss the best way to get to your goal.