By Mindy
BillSavings.com Brief: If you’d like to have a million dollars to your name, quit wishing and start doing. It’s actually a very reasonable goal to become a millionaire – and it’s surprisingly doable, even for the average Joe. It starts with a basic plan and simple savings tricks you’ll find easy to implement into your life.
It’s easier than you think to become a millionaire. If you’re like a lot of people, there are a handful of ways you can save money without drastically altering your lifestyle. Be wise about it, and the money you save can turn into a million bucks – making you a millionaire! Here’s how to get started.
Plan your millionaire path
First off, you need a plan. You’ve got to figure out how much to save, how long to save for, and how your saved money will turn into a million dollars. Luckily, it’s pretty easy to do.
- Start by thinking about the power of investing. The reason it’s so easy to become a millionaire by just saving a little money over time is all thanks to investment returns. If you’re serious about becoming a millionaire, you’ll want to invest all your money in a profitable investment vehicle.
- Choose the investment vehicle you’re most comfortable with. It can be anything – stocks, bonds, Certificates of Deposit, money market mutual funds, or retirement accounts. Whatever suits your fancy. You just need to make sure the investment has at least an 8% annualized rate of return (not hard to do with a retirement account).
- Factor in your age. Figure up how many years of earnings you’ve got left. If you want to be a millionaire quickly, you’ll have to save more money in fewer years. Otherwise, you can spread your savings out over the span of your career.
- Decide how quickly you want to become a millionaire. The length of time you’re willing to save for your millionaire payday determines how much you’ll need to save per month.
- Figure out your monthly savings goal. The easiest way to do this is to do a quick internet search for a site that calculates compound interest. From there, you can plug in your numbers. Use your expected 8% rate of return and list the number of years you’re willing to save. Plug in different amounts to save per month. Once you’ve got a number you’re comfortable with over the span of your specified timeline, multiply it by 12 to determine your annual contribution.
Savings examples to get you started
Let’s say you’re about 30 years old. You’re expecting a rate of return on your investment at 8%. If you save $448 a month for the next 35 years, you’ll have a million dollars to your name.
If you’re 40 and you only want to save for 25 years, you’ll need to save $1,055 per month.
If you’re only 25 and you get an early start, thus giving yourself 40 years to save, you only have to save $299 per month.
Where to get the money
At this point, you may be thinking that becoming a millionaire sounds great, but where will you get the money to save each month? Surprisingly, you’ll find it in the most basic places. Try some of these money tips and watch your savings add up to the monthly payment you need.
- Make good use of tax exemptions. When you’re smart about taking advantage of tax exemptions, your tax refund increases. Take the increase in your refund and put it toward your monthly-millionaire payments.
- Bring back the brown bag. If you can bring your lunch to work even a couple days a week instead of eating out, you’ll easily save a couple hundred dollars.
- Brew your own morning coffee. Even the cheapest cup of coffee at a shop can run you about two bucks a cup. Instead, get a basic coffee machine and brew your own caffeine fix. Your coffee savings will be substantial over the course of a year. Savings could add up to over $500.
- Raise your deductible. Most consumers pay almost $830 a year in auto insurance. If you raise your deductible, let’s say from $250 to $1,000, you’ll save $10 a month. That’s $120 in a year.
- Care for your car. If you pay attention to the upkeep of your car, you can save hundreds of dollars in repair expenses down the road. Make it a point to check tire pressure monthly. Get the oil changed regularly. Take the car in for an annual tune-up instead of delaying till something major has gone wrong.
- Go for generic medicines. Over-the-counter medicines all come in both brand-name form and generic form. Chemically, the drugs are the same. Price-wise, generics cost up to 40% less. Kick the habit of buying brand-name drugs and, assuming you fork over about $200 a year on medicine, you’ll save around $80.
- Take advantage of flexible spending accounts. If you or your partner gets flexible spending benefits for health care through your employer, make the most of it! Flex accounts allow you to save on tax for your health care expenses. Experts estimate the average family can save around $336 a year by using a flex account.
Focus your energy on your goal
To a lot of people, becoming a millionaire sounds like a far-off goal. What they don’t understand is that it’s doable; you just have to put your mind to it. Setting the goal to become a millionaire is the first step. Laying out a plan will get you started. Then following through on it – and making simple savings adjustments along the way – will get you to the million-dollar finish line.
8/12/2008
