Can I Realistically Save $1 Million Dollars in 10 Years?

how to save a million dollars in 10 years

how to save a million dollars in 10 years

A common number that people usually try to save is $1 million. It’s a good start to a long retirement, and it’s a threshold that people look at favorably when trying to reach their financial goals. Saving $1 million is possible, but it gets harder the fewer years you have. You will need to consider several factors to maximize your savings and make certain investments to save $1 million over 10 years. You can also work with a financial advisor who can manage your assets for the future.

Factors that help you save $1 million

To save $1 million, you’ll need to make sure you can earn enough to pay your living expenses while saving that amount of money. There are several ways to save this amount of money for the future, but here are some of the most important:

  • Your income: The higher your regular income, the more money you’ll likely be able to save. In order to save money in a relatively short period of time, it’s important to look for ways to increase that income by getting a new job, starting a business, or working on the side hustle.

  • Percentage of your income you can save: Long-term savings typically provide 10-15% of your income, but if you’re trying to grow from $0 to $1 million over 10 years, you may need to increase that percentage. The exception is if you have a very large amount of income each year.

  • Your investments: The investments you choose may be the key to accumulating additional wealth. You could invest in real estate and build value over many years, or you could look to invest in historically riskier investments, such as the stock market, and seek to build wealth faster.

  • Your annual expenses: How much you spend is a key factor in saving because the more you spend, the less money you have to invest or save for the future.

How much money do you need to save per month?

To reach your goal of $1 million in 10 years, SmartAsset’s savings calculator estimates you’d need to save about $7,900 a month. That is, if you simply invest your money in a high-yield savings account with an average annual percentage yield (APY) of 1.10%. If this amount is not possible with your income level, you will need to make riskier investments to reach your goal.

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Here are some examples of how much you’ll need to save per month based on your potential rate of return.

  • 3% return: Save ~$7200 per month

  • 5% return: Save ~$6500 per month

  • 7% return: Save ~$5900 per month

  • 10% return: Save ~$5000 per month

These numbers are just estimates based on the potential annual return on your investment. Keep in mind that the market can fluctuate quite a bit and that can affect how much you’ll need to save, so it’s important to increase your savings each month if you want to reach $1 million as quickly as possible.

5 Steps to Save $1 Million in 10 Years

how to save a million dollars in 10 years

how to save a million dollars in 10 years

To save $1 million in 10 years, you will need to consider all the above factors and then create the right savings strategy that can help you achieve it. There are five steps anyone can take to help them move toward their end goal, but the right method of saving to reach $1 million will depend on your personal financial situation.

Step 1: Determine your risk appetite

Before starting your journey to saving $1 million, it’s important to understand how you’re going to get there. Your risk appetite can guide you because it determines how much of your money you are willing to risk to maximize your potential return at any given time. The amount of risk you are willing to take can vary greatly depending on your age or how much money you already have saved up. However, the more risk you are willing to take, the more potential returns you may be able to earn if the market performs well.

Step 2: Create and follow your investment strategy

Once you have a good understanding of how much risk you are willing to take, you can create an appropriate investment strategy. The investment strategy will be your goal to reach $1 million in less time than most will save for retirement. You might want to invest in real estate if you’re looking for slow and steady returns, while you might want to invest heavily in the stock market if you want to take on more risk. No matter what you choose, the best investment strategies will usually have some balance throughout your portfolio.

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Step 3: Make regular investment contributions

If you plan to accumulate $1 million in savings over 10 years, you may need to regularly set aside money for investments. This will give you the money you need to buy assets so they can grow over time. The more money you can invest using the right strategy, the more you can save ten years from now. Regular commitment is a key component in building your wealth.

Step 4: Find ways to earn extra income

A great way to save more money is to make more money. Whether you can change jobs or take on another job that brings in more income, your goal will be easier to achieve. To help fund their ambitious savings goals, many people consider taking on a side job or side project. Whatever you choose, it can be very helpful to look at how you can build up more money for savings or investments.

Step 5: Save money where you can

If you maximize how much you can earn and invest, the next thing you can control is how much you spend. Cut your expenses wherever you can to save money that you can save or invest to increase your overall wealth. If you invest the amount of money you save, the return on investment from cost reduction is much more than just the amount of money you end up not spending. It takes discipline and real effort to keep your costs as low as possible.

Where to put your money when you reach $1,000,000

While the market is a great place to grow your wealth, it may not be the best place to save $1 million once you’ve built up that much. Best practice is usually to hold money in multiple accounts to diversify your potential risk. Here are some options to help you save money once you hit the $1 million mark.

  • High Yield Savings Accounts: A high yield savings account is a safe place to put your money because it will be available at a major financial institution and you can get up to $250,000 protected by the FDIC. You will typically earn around 1-3% per year on your money depending on the bank and account you choose. However, at the time of writing it was possible to find a high-yield savings account paying an annual percentage yield of 4.03%.

  • Certificates of Deposit (CD): A CD is a low risk investment option with low cost potential that provides a safe place to store money. You will not have access to the funds for the life of the CD without paying a penalty. However, they usually get protection for the same amount as a savings account.

  • Money market accounts: A money market account is similar to a savings account, but if you need to access money regularly, it might be a good option because it has some of the same features as a checking account.

  • Treasury bonds: Treasury bonds can be held for up to 30 years and are backed by the government. The returns are usually small compared to other types of investments, but they are generally safe.

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Bottom line

how to save a million dollars in 10 years

how to save a million dollars in 10 years

Saving $1 million can seem like a daunting task that requires a lot of navigation. The journey can be frustrating and you may need extreme discipline to achieve this goal in 10 years. However, with the right strategy and execution, $1 million in savings can change your long-term financial bottom line. If you’re not sure you can get there on your own, you can work with a professional to help you create a plan or manage your funds.

Investment advice

  • Trying to analyze the market and figure out where to best invest your money can be difficult, but working with a financial advisor can make it a lot easier. A financial advisor can help you create a long-term investment plan and even manage your assets for you. If you don’t have a financial advisor, finding one isn’t difficult. SmartAsset Free Tool matches you with up to three verified financial advisors serving your area, and you can interview your advisors for free to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goalsstart now

  • When looking at different investment options, it’s important to understand how each investment can affect your overall portfolio. You can use the SmartAsset Asset Allocation Calculator to see what a recommended portfolio allocation would be to help you reach your $1 million goal.

Photo credit: ©iStock.com/andresr, ©iStock.com/Jinda Noipho, ©iStock.com/Liliia Bila

The post How to Save $1 Million in 10 Years appeared first on SmartAsset Blog.

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