Jeff White
·9 minutes reading
A common number that people usually search forThe savings amounts to $1 million. It is a good start to a long-term retirement and it is a threshold that people look at positively if they want to achieve their financial goals. Savings of one million dollars is achievable, but it becomes more challenging the fewer years you have. You need to consider a number of factors to maximize your savings and make certain investments to save $1 million in ten years. You can alsoworking with a financial advisorwho can manage your assets for the future.
Factors that contribute to a $1 million savings
To save $1 million, make sure you can earn enough to cover your living expenses while saving that amount. There are several ways to accumulate that amount for the future, but here are some of the most important:
Your income:The higher yourordinary income, the more money you are likely to save. Looking for ways to increase that income, whether that's by finding a new job, starting a business or working on the side, is important for saving money in a relatively short time.
Percentage of your income that you can save:Savings forlong-termtypically recommends 10-15% of your income, but if you're trying to go from $0 to $1 million in 10 years, you'll probably need to increase that percentage. The exception to this is if you have a very large income each year.
Your investments:Ofinvestmentswhich you choose will likely be the key to accumulating additional wealth. You can put money into real estate and build value over many years, or you can invest in historically riskier investments, such as the stock market, and aim to accumulate wealth faster.
See AlsoIf You Invested $10,000 In The S&P 500 Twenty Years Ago, Here's How Much Money You'd Have Today | The motley foolWhy not just invest in the S&P 500? Lessons in diversification | SarwaIf you had invested $1,000 in Amazon in 1997, this is the amount you would have todayFuture value of $1,000 in 20 yearsYour annual expenses:How much you spend plays a big role in how much you save because the more you spend, the less money you have to invest or set aside for the future.
How much money do you need to save per month
To reach your goal of $1 million in 10 years, SmartAsset'ssavings calculatorestimate that you should save about $7,900 per month. This is if you just put your money in a high interest savings account with an averageannual percentage yield (APY)of 1.10 percent. If this amount is not achievable with your income level, you will need to make riskier investments to reach your goal.
Here are some examples of how much to usesave per monthbased on what your return could be.
3% yield:Save ~$7,200 per month
5% yield:Save ~$6,500 per month
7% yield:Save ~$5,900 per month
10% yield:Save ~$5,000 per month
These figures are only estimates based on potentialannual returnon your investments. Keep in mind that the market can fluctuate quite a bit and this can affect how much you need to save. So it's important to maximize your savings every month if you want to reach $1 million as quickly as possible.
5 steps to save €1 million within 10 years
To save $1 million in 10 years, you need to consider all the above factors and then create the right savings strategy to help you do so. There are five steps that anyone can follow that will put them on the right path to their ultimate goal, but the right savings method to reach $1 million depends on your own personal financial situation.
Step 1: Determine your risk appetite
Before you start down this path of saving $1 million, it's important to understand how to get there. Yourappetite for riskcan guide you because it tells you how much of your money you are willing to risk to maximize potential returns at any given time. The amount of risk you are willing to withstand can be very different depending on your age or how much money you have already saved. However, the more risk you are willing to take, the greater the potential returns you can earn if the market is successful.
Step 2: Build and track your investment strategy
Once you have a good understanding of how much risk you are willing to take, you can create oneinvestment strategythat match. The investment strategy will be your goal to reach $1 million in a shorter period of time than most people save for retirement. You may want to invest in real estate if you are looking for slow and steady returns, while you may want to invest heavily in the stock market if you are willing to take on more risk. Whatever you choose, the best investment strategies will usually have some balance in your portfolio.
Step 3: Make regular investment contributions
If you want to build up $1 million in savings within ten years, you'll likely need to regularly set aside money for investments. This gives you the money you need to buy assets so they can grow over time. The more money you can invest with the right strategy, the more you can save after ten years. Regular commitment is an important ingredient for building your wealth.
Step 4: Find ways to earn extra income
A good way to save more money is to earn more money. Whether you can change careers or take another job, having more income will make it easier for you to achieve your goal. Many people consider taking on a side hustle or extra project work to help finance their ambitious savings goals. Whatever you choose, looking at how you can raise more money to save or invest can be a big help.
Step 5: Save money where you can
If you maximize how much you can earn and invest, then the next thing you can controlhow much you use. Reduce your expenses where you can save money that you can put away or invest to increase your overall wealth. If you invest the amount you save, that isreturn on investmentCost savings is much more than just the amount of money you don't end up spending. This 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 good place for thatgrow your wealth, it might not be the best place to save your $1 million once you've built that much. The best practice is usually to keep money in multiple accounts to diversify any risks. Here are some available options that will help you save your money once you reach the $1 million mark:
High return savings accounts:INsavings account with high returnsis a safe place to invest your money since it stays with a major financial institution and you can get up to $250,000 protected by the FDIC. You'll normally earn around 1% - 3% on your money annually, depending on the bank and account you choose. However, at the time of writing, it was possible to find a high-interest savings account that pays one outannual percentage dividend of 4.03%.
Certificates of Deposit (CDs):INCDis a low-risk, low potential payout investment option that provides a safe place to store your money. During the life of the CD, you will not have access to the funds without paying a penalty. However, they typically receive protection for the same amount as a savings account.
Money Market Accounts:INmoney market accountsimilar to a savings account, but if you need access to the money more regularly this could be a good option as it has some features similar to a checking account.
Government bonds:Government bondscan be held for up to 30 years and supported by the government. The returns are usually small compared to other types of investments, but they are generally safe.
In short
Saving one million dollars can seem like a daunting task that requires a lot of navigation. The journey can cause frustration and require extreme discipline to achieve that goal within ten years. But with the right strategy and execution, achieving $1 million in savings is something that can change your long-term financial results. If you're not sure you can get there yourself, you can work with a professional to help you create a plan or manage your assets for you.
It can be difficult to analyze the market and figure out where best to invest your money, but...collaboration with a financial advisorcan make it significantly 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 doesn't have to be difficult.The free tool van SmartAsset connects you with up to three vetted financial advisors serving your area, and you can interview your advisors for free to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals,start now.
When looking at different investment options, it's important to understand how each investment can impact your overall portfolio. You can use SmartAssetasset allocation calculatorto see what the suggested portfolio allocation would be to help you reach your $1 million goal.
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