Everyone want’s a million dollars, for the most part. Some may even have – making $1,000,000 a goal of theirs on their lifetime to do list. You haven’t been taught how to get there and your employer doesn’t really help you learn what you need to do to make, earn or generate a stock portfolio that is worth a million dollars. Every think about what it could take to build $1,000,000 in 15 years of saving and investing? What if I could show YOU that YOU can be a millionaire by following simple math and having dedication to the process?
Why One Million Dollars?
I know, it just sounds good doesn’t it? The ultimate goal. So far, but yet, based on all the news, doesn’t seem that uncommon. That is, considering the news covers billionaires, versus millionaires.
Think about that, 15 new billionaires. It truly makes millionaires hang out in the shadows. In fact, as of 2019 (per Credit Suisse), there are over 18.6 million millionaires in the United States. At approximately 330 million people, that’s over 5.5% of people that are millionaires. Put in another way, 1 in 20 are millionaires here in these 50 states!
BUT and this is a big BUT, being a millionaire still means SO much. The 7 figures, financial independence is usually achieved around this mark. You still grow up wanting to achieve that million or millionaire status. I know even in my lower 30’s, that’s still a significant threshold. Trust me, I’m not there yet, but can definitely taste it as I’m getting closer.
They do say the first $100,000 is the hardest, but I will say going after the first $1,000,000 feels even harder. This is coming from a dividend investor, with a savings rate of at least 60% and has a dividend portfolio that churns out dividends almost on the daily! Yes, achieving the first $1,000,000 is a significant milestone. Attempting to achieve $1,000,000 in 15 years is an even bigger milestone!
Don’t think it is significant or hard to reach? Let’s say that during the mid-to-late March of 2020, during the early stages of COVID-19, the market dropped over 30%! Think about this, if you were at $950,000 – staring at that mark, and your valuation dropped 30%, you’re now at $665,000. Obviously, as dividend investors the valuation doesn’t matter or matter as much as that dividend income stream, but deep down, you want to see that 7-figure mark!
However, I know why you are here. You want to know how you can reach the life-long goal of hitting the 7 digits, the million mark. We will jump into that section next. I will be keeping it simple on how to reach what the financial freedom writers call – the promised land. It will be a calculated approach and a very specific plan that can be automated beyond belief.
Warning: You have to have grit, guts, grind and an unemotional mentality. If that is what you have, then YOU have come to the right place. Ready to find out how to easily & automatically become a millionaire?
How can anyone get there?
First, you can’t make $5,000 a year and expect to become a millionaire or have $1,000,000 in 15 years. Remember, this is to put you on the fast track to 7 figures. Now, the average starting salary is approximately $55,000 in the U.S. out of college and that can vary depending on what part of the country, background and path you take.
Second, not only do you need to make a certain income threshold, but you also need to have a savings rate that is above normal. Yes, that is above the normal 10% savings rate suggested by a magnitude of “professionals”. See the quote from Nerdwallet below.
Third, you must invest the hard-earned and saved money into assets. Assets that can generate a return and increase in value, produce cash flow, such as dividends. Obviously, we tend not to hold as much cash on hand, considering high-yield online savings rates are crumbling slowly, but surely. We made a video on this exact topic – Cash Is Dead.
Related: Watch – Cash is Dead
For additional support and assumption use, through Investopedia, the S&P 500 has an average rate of return of 10-11%, however, they are also showing 8% returns from 1957-2018. I’ll go slightly conservative and say the average return is 8.50% in the stock market, over the long-term.
Going back to the second step and something can’t do is take the investment advice of putting aside 10% per year! Doing that, you may as well work forever and that is no fast track to 7 figures. Further, you are on this blog for a reason and building wealth earlier is probably one of them! In all honesty – you must do what’s best for you and your family, but I am here to lay out a plan to make you a millionaire in 15 years.
Therefore, to remove the suspense, to reach $1,000,000 in 15 years, one must save each and every month, $2,850. This is based on an average stock market return of 8.50% and investing this month each month for 15 straight years. $2,850 every month is also $34,200 to save per year. See the results from an investment calculator below for the proof of the numbers:
Lastly, you may also wonder what should you invest in, in order to produce these results that would make anyone drool on their journey to financial freedom. The answer is – it depends. There are many ways with the stock market that can allow you be on this plan to financial independence. You can invest in individual stocks, mutual funds, exchange traded funds (ETFs) or even a combination of these! Want to learn more on that area? See our related articles and videos.
Related: Watch – Investing with Vanguard
Related: Read – Top 5 Foundation Dividend Stocks for any Portfolio
Now that you know the number you must set aside and invest, you still may have questions. Such as – what does your savings rate need to be and/or what can you do to save money, to help reach this target. We will get into that next section, below.
what does my savings rate need to be?
I built a chart that describes how much you truly need to save every month and as it relates to a percentage of your income. We will start with the $55,000 example and will work our way up to $145,000. You will see the savings rate as a % to income that you need to save, pre-tax:
That first line is correct. If you make $55,000, you will have to save 62% of your income, each month. You will have to have very low monthly expenditures to keep that savings rate up, but it is still very doable.
Remember this isn’t supposed to be easy. You want to have $1,000,000 in 15 years! However, if you are able to increase your income or if you marry with a joint income and have a higher combined income – then obviously your savings rate does not have to be as high. As you an see the in the chart, the savings rate declines as your income grows, as expected.
how to save $2,850 per month
Now that your wheels are spinning, you should be asking yourself, how do I save $2,850 per month. Think of your highest costs: Shelter, Auto and Food. Time to dive in a few tips and tricks to save.
To start, see if you can lower your housing costs as much as possible. Whether that is to re-finance your mortgage to be at one of the lowest mortgage rates in all of history (I refinanced mine to 2.875% for a 20-year mortgage, saving me money each month!). Bert also refinanced his mortgage last year and is saving over $50+ per month!
You can also decide to have a roommate or share an apartment. However, these situations are if you are more than likely single and at the $55,000 mark. Remember, you can have a higher income or live with someone that may not make housing costs as steep as what it may be. You end up splitting all costs including your utilities. I always recommend shopping for your utility provider, so long as your area is deregulated.
Related: Bills to Review Annually
Auto / Vehicle costs
Relating to your vehicle – try not to have a loan on your car. That was one of my biggest regrets financially, as you are driving a depreciating asset that is taking money out of your pocket with little, to no, tax incentives. Further, there is nothing worse that making a monthly payment that is losing value each month! I understand emergencies come up, manage this the best that you can, no doubt.
In addition, the amount you drive plays a significant aspect. You should try to combine many trips you make during a week/month and consolidate in one large trip. Further, you should consider having more guests instead of traveling out, as well. The more you drive, the higher the risk profile you are and the more wear & tear you put on your car. Do you see where I am heading?
Yes, this means that your replacement costs for tires, oil changes, brake pads, rotors will creep on you. Further, you will also have higher auto insurance the more you drive, potentially. One last note on auto insurance – definitely make sure you shop your auto insurance around often and have the “right” amount of insurance for your driving profile – don’t pay for insurance you do not need or for a level of coverage that is does not correlate to your driving profile!
Ah, the beloved food costs. Let me tell you – I have seen two sides of this coin and there’s a rarity on the happy medium. For the going out/restaurant goers (though far slimmer with COVID-19), this can get out of hand if you buy appetizers, rounds of drinks, etc.. to the point where you can walk away with a triple digit bill. Now, doing this every once in a while is okay for special moments and/or occassions, but if this is a habit, then your savings rate will surely take a hti.
What my wife and I try to do is plan out an experience (again, when restaurants were a little easier to be at) and go maybe once every few weeks to try a new place, a date night or we read a great review somewhere that enticed us. We usually will split an appetizer and an entree, to keep the price and diet in better shape.
Then there is the extreme me. Heck, I am known to make banana, peanutbutter, oatmeal on a daily basis for my lunch. I love it so much that I even wrote about it. I even estimated that my lunch costs ~$0.18. Hard to beat that, right?
I believe the point I am driving at is control. No one is forcing you to spend money on any certain item, certainly food. Not only are you in control for what food you buy, restaurant you go to or what is on the menu – but you are also in control for what you are putting in your mouth! Therefore, there is a health component to this as well.
Lastly – I wrote an article about 5 ways you can save $500 starting TODAY if needed. The 5 ways are potentially switching your cell phone carrier, shopping your auto insurance around, re-financing your student loans and a few other items. Definitely worth a read in case you are interested in making changes, now!
Related: 5 Ways to Save $500 TODAY
other tips to $1,000,000 in 15 years
Here is a list of other tips and recommendations that you can deploy to reach the amount. These tips are geared towards how to invest your savings and stay on track to be at $1,000,000 in 15 years. Check them out:
1.) When you set up a brokerage to make your investments, you can set up automatic investments of $2,850 each and every month. Automation, as I am sure you already know, takes the emotion and timing the market out of the equation.
2.) Don’t react to negative news in the stock market. We are in unprecedented times, no doubt. However, try not to impulse sell because that is what the news, media and the herds are doing. Remember, per Warren Buffett, you always want to be greedy when others are being fearful and vice versa! In other words, stay the course!
3.) Try to avoid lifestyle inflation. As your income grows – you can actually increase your savings, speeding up the road to $1,000,000 even faster! However, you may also be influenced by peers, co-workers, friends to increase your cost of living. Whether that be a new car, upgraded place to live, new clothing, going out to bars/nicer restaurants. Remember – refer back to the steps on how to save!
4.) Celebrate wins along the way. The milestones are REAL as a dividend investor and as an investor in general. This can be one of the hardest, ultimate goals to accomplish. Think of the journey to $1,000,000 with certain pedestals. You can celebrate the mini-victories at these levels: $100,000, $250,000 $500,000 and the final, $1,000,000.
5.) Enjoy the process and learn more about yourself. If there is one thing I could tell you on this journey, since I am on this specific journey (well, I am trying to beat 15 years, with a significantly high savings rate!), I have learned SO much about what I like about life, what is important and what life I can see at the end of these goals. Further, I have enjoyed every step along the way, due to learning more about myself and feeling in control of my destiny! I hope you feel the same – but let me know if you need help talking through this area, as well.
As always – share YOUR feedback and other tips/tricks that have worked. In addition – if you have a success story – please share it and your #1 action that helped YOU achieve this monumental goal! We would love to read about how you became a millionaire and I bet the readers & community would love to read/learn as well. Were you able to achieve $1,000,000 in 15 years or did it take you longer or less?
Thank you again for stopping by, we are all on this financial freedom journey together. As always, good luck and happy investing!