A common number that people generally seek to save is $1 million. It’s a good start to long-term retirement and is a threshold that people view favorably as they seek to reach their financial goals. Saving $1 million is doable, but it becomes more challenging the fewer years you have. You’ll need to take into account a number of factors to maximize your savings and make certain investments in order to save $1 million in 10 years. You can also work with a financial advisor who can manage your assets for the future.
Factors That Contribute to Saving $1 Million
In order to save $1 million you’ll need to make sure you’re able to earn enough so that you can pay for your living expenses while saving that amount of money. There are a number of ways to go about accumulating that amount of money for the future, but here are some of the most important:
- Your Income: The higher your regular income, the more money you’ll likely be able to save. Looking for ways to increase that income whether it be through getting a new job, starting a business or working on a side hustle is important in order to save money in a relatively short period of time.
- Percent of Your Income That You Can Save: Saving for the long-term typically brings a recommendation of 10-15% of your income, but if you’re trying to go from $0 to $1 million in 10 years then you’ll likely need to increase that percentage. The exception is if you have a very large amount of income coming in every year.
- Your Investments: The investments you choose will likely be key to accumulating additional wealth. You could put money into real estate and build value over many years or you could look to invest in historically riskier investments, such as the stock market and aim to accumulate wealth faster.
- Your Annual Expenses: How much you spend plays a major factor in how much you save because the more you spend, the less money you have to invest or put away for the future.
How Much Money You Need to Save Per Month
In order to hit your goal of $1 million in 10 years, SmartAsset’s savings calculator estimates that you would need to save around $7,900 per month. This is if you’re just putting your money into a high-yield savings account with an average annual percentage yield (APY) of 1.10%. If that amount isn’t doable with your income level then you’ll need to make riskier investments in order to hit your goal.
Here are some examples of how much you’ll need to save per month based on what your rate of return might be.
- 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 numbers are just estimates based on a potential annualized return on your investments. Keep in mind that the market can fluctuate quite a bit and it could impact how much you’ll need to save so it’s important to maximize your savings every month if you want to get to $1 million as quickly as possible.
5 Steps for How to Save $1 Million in 10 years
In order to save $1 million in 10 years you’ll need to take all of the above factors into account and then create the right savings strategy that can help you get there. There are five steps that anyone can follow that will help get them down the right path toward the end goal, but the right method of saving to hit $1 million will depend on your own personal financial situation.
Step 1: Determine Your Appetite for Risk
Before beginning down this path of saving $1 million, it’s important to understand how you’re going to get there. Your appetite for risk can guide you because it provides how much of your money you’re willing to risk in order to maximize the potential return at any given time. The amount of risk you’re willing to stomach could be very different based on your age or how much money you have already saved. However, the more risk you’re willing to take on, the more potential return you may be able to earn if the market has a successful run.
Step 2: Build and Follow Your Investment Strategy
Once you have a good grasp on how much risk you’re willing to take on then you can create an investment strategy that aligns. The investment strategy will be your goal of reaching $1 million within a shorter time period than most save for retirement. You might want to invest in real estate if you’re looking for a slow and stable return while you might want to heavily invest in the stock market if you’re willing to take on more risk. Whatever you choose, the best investment strategies typically will have some level of balance throughout your portfolio.
Step 3: Make Regular Investment Contributions
If you’re going to accumulate $1 million that you save within 10 years then you’ll likely need to set money aside for investments on a regular basis. This will give you the money you need to buy assets so that they can grow over time. The more money you’re able to invest, with the right strategy, the more you’ll be able to have saved after a decade. A regular commitment is a key ingredient to 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 on another job, bringing in more income will make your goal easier to obtain. Many people consider a side hustle or extra project work in order to help fund their ambitious savings goals. Whatever you choose, looking at how you can accumulate more money for saving or investing can be a huge help.
Step 5: Save Money Where You Can
If you maximize how much you can earn and invest, then the next thing you can control is how much you’re spending. Cutting your expenses wherever you can save money that you can put away or invest to grow your total wealth. If you invest the amount of money that you save then the return on investment on cutting costs is much more than just the amount of money you don’t end up spending. This takes discipline and real effort in order to keep your costs as low as possible.
Where to Place Your Money Once You Reach $1,000,000
While the market is a great place to grow your wealth, it might not be the best place to save your $1 million once you build that much. The best practice is typically to have money in multiple accounts to diversify any potential risk. Here are some options available to help you save your money once you reach the $1 million mark:
- High-yield savings accounts: A high-yield savings account is a safe place to put your money as it will sit with a large financial institution and you can get up to $250,000 protected by the FDIC. You’ll typically earn around 1% – 3% annually on your money, depending on the bank and account you chose. At time of writing, however, it was possible to find a high-yield savings account paying an annual percentage yield of 4.03%.
- Certificates of deposit (CDs): A CD is a low-risk investment option with a low potential payout that provides a safe place to stash your money. You won’t have access to the funds for the duration of the CD’s term without paying a penalty. However, they do typically receive 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 to access the money more regularly then it could be a good option as it has some similar features to a checking account.
- Treasury bonds: Treasury bonds can be held for up to 30 years and are backed by the government. The return is typically small in comparison to other types of investments, but they are generally safe.
Saving $1 million can seem like a daunting task that requires a lot of navigation. The journey may create frustrations and you may need to exercise extreme discipline in order to hit that goal within 10 years. However, with the right strategy and execution hitting the $1 million in savings is something that can change your long-term financial outcome. If you’re not sure you can get there on your own then you can work with a professional to help create a plan or manage your assets for you.
Tips for Investing
- Trying to analyze the market and figure out where the best place to invest your money can be hard, but working with a financial advisor can make it substantially easier. A financial advisor can help you make 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 hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As you’re looking at different investment options, it’s important to understand how each investment might impact your overall portfolio. You can use SmartAsset’sasset allocation calculator to see what the suggested portfolio breakdown would be to help you reach your $1 million goal.
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