Making a Million by Minding the Gap
According to my budget, I am saving or investing a bit over 20% of my gross income. I am actually doing a bit better than this if you count money I am putting towards paying off my debts early. For the moment however, 20% is how much I am really putting away.
To put this number in perspective, I will have to gross around five million dollars to actually have saved a million for myself. Dividing that five million by my actual gross salary and I will have an estimate for how long it will take to actually save my first million dollars.
I am currently making a bit over $70K at my job, so that translates to 71.4 years.
That is of course just a rough estimate. I should obtain a million much earlier than that if my investments provide any sort of meaningful return over the next few decades.
Increase Your Saving Rate
No matter how you slice it, increasing the amount of every dollar you keep for yourself will help push your millionaire moment closer.
If I could double my saving rate, I would be a millionaire in only 35.7 years. All of a sudden that number seems more reasonable.
Don’t think you can double your own savings rate? How much money are you putting towards debt repayment right now? For me, including extra payments I am making above and beyond my minimums, I am right around 10%. As soon as my remaining debt is gone, my savings rate will jump to a bit over 30%. Already half way there without too much sweat.
Don’t Forget to Make More Money
The best way to increase your savings rate is to simply make more money without increasing your standard of living. Easier said than done? Absolutely. But then if the best things in life were accomplished by reading blogs, we would have nothing but happy and successful people in the world. Here are a few broad ideas.
- Ask for a raise at work
- Start a side business
- Turn a side project into something marketable
Keep the idea in the back of your mind at all times and be ready when an opportunity presents itself. Inspiration may come from unanticipated sources and fortune as we all know favors the prepared.