A common number that people generally try to save is $1 million. It is a good start to a long-term retirement and it is a barrier that people view positively if they want to achieve their financial goals. A million dollar savings 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 also work with a financial advisor who can manage your assets for the future.
Factors contributing to a $1 million savings
To save $1 million, you need to make sure you’re earning enough so that you can pay your living expenses while also saving that amount. There are a number of ways to collect that amount for the future, but here are some of the main ones:
Your income: The higher your fixed income, the more money you can probably save. Looking for ways to increase that income, whether it’s finding a new job, starting a business, or working on a side income, is important to saving money in a relatively short period of time.
Percentage of your income you can save: Saving for the long term typically yields a recommendation of 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: The investments 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.
Your annual expenses: How much you spend plays an important 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 you need to save per month
To reach your goal of $1 million in 10 years, SmartAsset’s savings calculator estimates that you would need to save about $7,900 per month. This is if you just put your money in a high-yield savings account with an average annual return (APY) of 1.10%. If that amount isn’t attainable with your income level, you’ll need to make riskier investments to reach your goal.
Here are some examples of how much you should save per month depending on your return.
3% return: Save ~$7,200 per month
5% return: Save ~$6,500 per month
7% return: Save ~$5,900 per month
10% return: Save ~$5,000 per month
These figures are estimates only, based on a potential annual return on 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 is important to maximize your savings every month if you want to reach $1 million as soon as possible.
5 steps to save €1 million within 10 years
To save $1 million in ten years, you need to consider all the above factors and then create the right savings strategy that can help you do that. There are five steps anyone can follow that will put them on the right track towards their final goal, but the right way to save to make $1 million will depend on your own personal financial situation.
Step 1: Determine your risk appetite
Before embarking on this path of million dollar savings, it’s important to understand how you’re going to get there. Your risk appetite can give you some guidance as it indicates how much of your money you are willing to risk to maximize the potential return at any given time. The amount of risk you are willing to accept can vary greatly 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 return you can get if the market is successful.
Step 2: Build and track your investment strategy
Once you know how much risk you are willing to take, you can draw up an investment strategy that matches it. The investment strategy will be your goal to reach $1 million in a shorter period of time than most people save for retirement. You might want to invest in real estate if you’re looking for slow and steady returns, while you might want to invest heavily in the stock market if you’re willing to take on more risk. Whichever you choose, the best investment strategies will typically have some degree of balance in your portfolio.
Step 3: Make regular investment contributions
If you want to accumulate $1 million in savings within ten years, you will probably need to put money aside for investments on a regular basis. 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. A regular commitment is an important ingredient for building your wealth.
Step 4: Find ways to earn extra income
A great way to save more money is to make more money. Whether you can change jobs or take another job, bringing in more income will make it easier for you to reach your goal. Many people consider a side job or additional project work to help fund their ambitious savings goals. Whichever you choose, looking at how to collect more money to save or invest can be a huge help.
Step 5: Save money where you can
When you maximize how much you can earn and invest, the next thing you can do is control how much you spend. Reduce your expenses where you can save money that you can put away or invest to grow your total wealth. If you invest the amount of money you save, the return on investment from cost savings is far greater than just the amount of money you end up not spending. This takes discipline and real effort to keep your costs as low as possible.
Where to put your money once you hit $1,000,000
While the market is a great place to grow your wealth, it may not be the best place to save your $1 million once you’ve built up that much. The best practice is generally to have money in multiple accounts to diversify any potential risk. Here are some available options that will help you save your money once you hit the $1 million mark:
High-interest savings accounts: A high-interest savings account is a safe place to store your money because it’s with a major financial institution and you can get up to $250,000 protected by the FDIC. Typically, you will 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-yield savings account that gave an annual return of 4.03%.
Certificates of deposit (CDs): A CD is a low-risk, low-payout potential investment option that provides a safe place to store your money. You cannot access the money during the term of the CD without paying a fine. However, they typically get protection for the same amount as a savings account.
Money Market Accounts: A money market account is similar to a savings account, but if you need more regular access to the money, it could be a good option as it has some similar features to a checking account.
Treasury Bonds: Government bonds can be held for up to 30 years and are backed by the government. Returns are typically small compared to other types of investments, but they are generally safe.
Saving one million dollars can seem like a daunting task that requires a lot of navigation. The journey can be frustrating and you may have to exercise extreme discipline to reach that goal within ten years. However, with the right strategy and execution, hitting the $1 million in savings is something that can change your financial results in the long run. If you’re not sure you can get there on your own, you can work with a professional who will help you create a plan or manage your assets for you.
Tips for investing
It can be difficult to analyze the market and figure out where best to invest your money, but working with a financial advisor can make it significantly easier. A financial advisor can help you create a long-term investment plan and even manage your wealth for you. If you don’t have a financial advisor, it shouldn’t be difficult to find one. SmartAsset’s free tool matches you with up to three vetted financial advisors operating in your area, and you can interview your advisors for free to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goalsstart now.
As you look at different investment options, it’s important to understand how each investment can affect your overall portfolio. You can use SmartAsset’s asset allocation calculator to see what the suggested portfolio allocation would be to help you reach your $1 million goal.
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