We all want to have the financial freedom that comes with being a millionaire, but, to many, that dream seems out of reach. People will say that they don’t make enough money to amass any sort of wealth, but that is not true! That misconception is frighteningly common among Americans. Becoming a millionaire seems like something that is only possible for those who have a high income or an hourly rate that well exceeds $15 an hour.
The resources you may have available to you early on may seem way too small to reach your financial goals to become a millionaire. So, how do you do it? You need to know how to save your money and invest it wisely to optimize the strength of your finances. It isn’t impossible to amass wealth and build your savings up to become a millionaire while earning $15 an hour. It will require discipline and planning, but it’s not out of reach.
When should you start to build your savings? Now! The earlier you start to save your money, the better. The sooner you start saving, the sooner you will reach your goal of financial independence. Why is this? To start, the longer you save, the more time you have for your money to build up. With more time, the percentage of your income that you have to set aside to reach your goal is lower, which makes your goal all the more accessible. You won’t worry so much about choosing between saving and living comfortably when you don’t have to allocate as much money to set aside for your financial goal.
Depending on when you start saving, the percentage of your wage you should save to reach your million dollar goal changes. For this article, we’re going to assume that you are working full time for $15/hour, which works out to an annual income of $31,200, and an approximate monthly income of $2,600. I am also not accounting for any other savings you might have, or raises in pay, promotions, etc. With just that income, if you begin to save at age 20, consider starting to save 10% of your income with savings, which would be $260/month. With a retirement account that has a 7% return, you would hit your goal of $1,000,000 at age 65 years old. If you start saving at age 25 and save 15%, or $390 monthly, you would save $4,828/year and have approximately $1,100,000 by the time you retire at age 65. While it takes commitment to save 15% of your salary, this should be highly encouraging! Unfortunately, the later you start saving, the harder it becomes to reach your goal. If you start saving at age 30, you will need to save around 21%, or $546/month, in order to save $6,552/year and reach $1,000,000 at age 65. The good news is that it is still possible!
As you continue saving through your career, I strongly recommend increasing the amount you save monthly in order to maximize the power of the interest built upon your savings per year! As you can tell, if you start earlier, the less money you have to put aside to reach your goal. And, it is not an insurmountable goal by any means. You can do it, you just have to stay on top of it! Set it up to automatically come out of your paycheck each month.
Now, maybe you’re reading this article and are thinking that you haven’t started saving in time and it’s too late, so why bother? Well, I am here to tell you that it’s never too late to start saving! Just because many authorities on the subject believe it’s best practice to start by age 25 doesn’t mean that you’ve lost out on any opportunity to amass wealth and reach your financial goals. There are plenty of options available to help boost your savings if you are starting a little later. However, what that does mean is that you will have to save a higher percentage of your pay in order to ‘catch up,’ as it were. You might even have to more aggressive with your investments to recoup the savings you lost through your delayed start.
Saving to reach a million dollars takes a long time. Investing your money in the market can help you to grow your wealth faster and sustainably. Investing may seem intimidating or seem like it isn’t an option unless you have a lot of money, but that’s not true. Anyone can invest and grow their wealth. Not only can investing help to combat inflation but it can also give you a passive income and build wealth through compounding interest.
Before you begin, you should figure out your overall goals: why are you investing and how long do you plan to invest? Is your goal a long-term goal or is it more short-term? Keep in mind what level of risk you are willing/able to take. All investments will have some level of risk as the market can be volatile and changes over time, which is why it’s better to invest when you have longer-term goals rather than more short-term goals. The longer you are investing, the more likely you can recoup any losses if (when) the market dips. Stay focused and remember that you too can become financially wealth by hard work and discipline. Becoming a millionaire on $15/hour may seem like it is out of reach, but as you have learned, that’s simply not true. The facts show otherwise. With proper planning and dedication over the span of your career, you can build your savings up, and with smart investing, you can achieve success with your financial goals. Being a millionaire is within reach. All you have to do is save and invest!
Written by Matthew Delaney