Paths To Becoming A Millionaire
Everyone dreams about becoming a millionaire at some point throughout their lives. What are the different paths of getting to one million dollars.
Some people like to play the lottery or go to a casino for an infinitesimal chance at winning it big.
Others are entrepreneurs and start a business hoping to eventually roll in the dough.
For most of us the best chance we have to become millionaires is through our normal 9 to 5 jobs. We have to save a large percentage of our paycheck and then invest it in something ie. stocks, real estate, currency, etc.
In the following examples I will present the possible results of investing in an S&P 500 Index Fund which has a 7% historical average return. Remember, past performance does not guarantee future results.
Different Income Levels
I will present 3 varying income levels to see how long it takes to get to $1M. This experiment will increase the savings rates as income increases.
I also assume that you are receiving an annual 3% raise and investing the majority.
Note that having a large income alone does not guarantee that you will be rich or even reach one million dollars. It is important to live within your means in order to grow your nest egg.
Start investing 30% of pre-tax income per year. Add $1,500 per year to investments (assuming you receive a 3% raise). You will reach $1M after 48 years.
Start investing 40% of pre-tax income per year. Add $2,000 per year to investments (assuming you receive a 3% raise). You will reach $1M after 40 years.
Start investing 60% of pre-tax income per year. Add $4,000 per year to investments (assuming you receive a 3% raise). You will reach $1M after 24 years.
The previous three examples show that getting to $1M is not a get rich quick scheme. It takes deliberate saving, investing, and budgeting. The earlier you start, the greater your chances for success due to the magic of compound interest (see above image).
Also note that these examples assume that people only receive a 3% raise every year. The time to get to $1M will decrease if you also contribute any increases in income due to promotions. You could also decide to earn extra money by starting a side hustle to get there quicker.
Getting to one million dollars should not be viewed as an impossible feat. If you start planning early enough you can reach your goals. If you start late you need to save extra in order to have a chance of catching up.
Everyone can benefit from optimizing their lives in order to save an extreme amount. This will drastically reduce the time it takes to get to $1M.
How long will it take you to reach $1M?