Imagine in just ten years you could have one million dollars socked away in a high-yield savings account, spinning off enough interest to live comfortably for the rest of your life. Short of hitting the lottery or receiving a lofty inheritance from a long-lost uncle, this might seem an impossible goal. Well, it nearly is, given the short time frame. However, if you are willing to make an incredible sacrifice, and catch a nice wave from a rebounding market, you just might enjoy becoming a millionaire in less than a decade.
$996 a Week for 10 Years
That is roughly the amount you would have to invest to save one million dollars in ten years, assuming an average 12% earnings rate. Historically, 12% is a realistic figure, albeit optimistically on the high side. Here is a look at how your $996 weekly contributions to your favorite investment account (I’ve used Scottrade, Sharebuilder and TD Ameritrade with good results) would add up each year:
Carving Out $996 a Week
I nearly laughed out loud when I typed that heading. I often read topics like “carving out $50 a month” or “shaving $20 off weekly expenses,” but rarely do we hear someone suggest “carving out $996 a week!” That is nearly $4,000 a month! If you are like me, that is more than I have to carve! So how does the average person go about contributing nearly $1,000 a week to savings? Using the principles discussed in books like I Will Teach You To Be Rich, you can discover ways to cut your expenses significantly while boosting your income.
Get a Side Hustle
A reader once wrote in that a friend told him “everyone needs a side hustle,” something to supplement their full time job. That’s great advice! It could be a small, home-based business opportunity that generates a few hundred dollars a month, an investment opportunity with a great passive income, such as peer-to-peer lending, or a substantial part-time career that you can cultivate in your off hours.
Either way, this “side hustle” could represent the majority of that $996 you have to come up with to make a million dollars in ten years. Obviously, some of the profits from this side gig will have to be reinvested to help it grow, but for the most part, your goal should be to try to save as much of those profits as possible.
Pay Off the Mortgage Early
If you have a $1,000 mortgage payment, paying it off early buys you one week’s worth of savings each month towards your millionaire dream. Eliminating a $2,000 mortgage provides two weeks. Pay off the mortgage early, and instead of sending a payment to the bank each month, send a deposit in that same amount. This step alone will put you on the fast track to building significant wealth.
Two Income Households-Save One, Spend One
In households with two working spouses, make an effort to live on one income and invest the other. Open a high-interest online savings account at one of the best online banks, and point one spouse’s direct deposit there. All further investments, such as transfers to a top online brokerage can be automatically deducted from that account.
If one spouse brings home $4,000 a month you just found the source for your $996 a week contributions. Living on one income may require downsizing homes and cars, and living way below your means, but the payoff is well worth it in the long run. Invest some of this money in equities, either in single stocks or in broader mutual funds.
I don’t mean to trivialize the amount of sacrifice (and luck) required to make this plan work. $996 is a significant amount of money, and at this phase in my life I could barely afford to contribute half that amount on a weekly basis. But it is a goal–something to strive for.
It is also important to point out that there is nothing magical about the one million dollar mark. You may find that you could live quite comfortably on the interest generated from $750,000, or even $600,000. Your “number” is a personal choice, but figuring out how to make a million dollars provides most of us a stretch goal.