How to Be a Millionaire, Saving Very Little per Month

Think This Goal is Out-of-Reach? Guess Again.

Butler holding tray of cash
If you avoid consumer debt and start investing when you're in your twenties or thirties, you can be a millionaire. Blend Images/John Lund / Getty Images

Do you think being a millionaire is out of the question for you?

Think again. If you avoid consumer debt and start investing when you're in your twenties or thirties, you can be a millionaire.

Here's how.

You Can Become a Millionaire: The Beginning

Let's assume you have $0 in your investment account right now. You have no debt, but you haven't saved anything, either.

Let's assume you put your investments into a tax-deferred account, such as a 401(k).

Let's also assume that your investments, over the long haul, will grow at an annualized average rate of 7 percent. (Investing legend Warren Buffet predicts the long-term annualized return of the U.S. stock market in the early-to-mid 21st century will be 7 percent.)

Remember: this is a very, very long-term average - over the span of 20 years or more. In any given year, your investments might be up or down.

Don't focus on the short-term. One year - or three years, or five years - is small-scale when you're talking about a lifetime portfolio.

With those three assumptions in mind - you're starting at $0, you're investing in a tax-deferred account, and you'll get a 7 percent return over the long haul. Let's look at how much you need to invest to create a $1 million portfolio.*

The Math of Becoming a Millionaire

If You Save: $100 per month

You'll Be a Millionaire In: 58 years and 6 months. That's a long time - if you're 25 now, you'll be 83 by the time you're a millionaire - so I recommend saving more.

If You Save: $200 per month

You'll Be a Millionaire In: 48 years and 10 months. Notice how simply saving an extra $100 per month ($200/mo instead of $100/mo) shaves a decade off the time it takes you to become a millionaire.

If You Save: $400 per month

You'll Be a Millionaire In: 39 years and 4 months.

That means if you're 25 now, you'll be a millionaire at age 64 - in time for retirement.

If You Save: $750 per month

You'll Be a Millionaire In: 31 years, 1 month. If you're 25 now, you'll be a millionaire at age 56. Did someone say "early retirement?"

If You Save: $1,000 per month

You'll Be a Millionaire In: 27 years and 6 months. If you have a baby today, you'll be a millionaire by the time you dance at your child's wedding -- or maybe by the time your grandchild is born. 

If You Save: $1,500 per month

You'll Be a Millionaire In: 22 years and 9 months. What a huge improvement over the "58 years" we were quoting at the $100/month savings rate!

If You Save: $2,000 per month

You'll Be a Millionaire In: 19 years and 7 months. Have a baby today, and you'll be a millionaire when he or she is in college.

If You Save: $2,500 per month

You'll Be a Millionaire In: 17 years and 3 months. Have a baby today, and you'll be a millionaire before your kid is out of the house. If you're currently 25 years old, you'll be a millionaire by age 42.

Want to run your own calculations? There are many online calculators can help you.

How Can I Save That Much Money?

I'm guessing your next question is something along the lines of "How on earth am I supposed to save $2,500 per month?"

I can boil that answer down to four words: Earn more. Spend less.

Here are some resources to help you earn more:

Here are some resources to help you spend less:

One final note:

If your employer offers a 401(k) match, take full advantage of it. Otherwise, you're leaving "free money" sitting on the table.

Conversely, if your employer doesn't offer a 401(k) match, or if you're self-employed (like I am), take the reins and start heavily investing your paychecks into tax-advantaged accounts like Traditional and Roth IRAs and Individual 401(k)'s.

Remember: if your job doesn't give you retirement benefits, that isn't an excuse to forgo saving. Take responsibility for your financial future.