This Is the Amount You Need To Save Per Day To Become a Millionaire

May 28, 2018

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What if I told you that if you saved $5 a day, every day for the next 48 years, you could become a millionaire? That means if you start saving at 22, by the time you reach 70, you should have $1 million.

FIVE FLIPPING DOLLARS per day!

That’s it.

You may have thought your daily habit of Starbucks coffee was expensive. But, it may actually be preventing you from being a millionaire.

The Numbers

The math is shockingly easy. Check out this millionaire calculator from CNN.

$5 savings per day equates to $150 per month and $1,800 a year. If you invest in a broad-based index fund like the S&P 500, with a historically return of 8%, you could return $1,000,000 over 48 years.

Let’s say that you decide to double your savings and invest $10 per day. That translates to $300 per month, or $3,600 per year.

That should get you to millionaire status in half the time, right? Unfortunately, wrong. It would only shave off 9 years, or roughly a decade.

This is due to the way compounding interest works.

The Effect of $5 Per Day

Here’s a graph that shows the progression to millionaire in 48 years. Compounding interest is a beautiful thing. Do you see the tremendous gains over time? The line almost ends up being vertical!

While it appears that the “real” money is made in the latter years, in my opinion, the real money is actually made in the beginning. If you don’t start early, you won’t receive the full benefits of compound interest.

Albert Einstein famously said,

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. Compound interest is the most powerful force in the universe.”

Self-Discipline

While some may think that making $1 million is hard, the hardest part is actually having the discipline to save $5 a day. It may seem easy in theory, but it’s another thing to actually execute.

If you’re like me, you may sometimes lack the discipline with your finances and spend whatever is available in my account. Automation has been a great way to keep me accountable and on the right track.

After reading the book, The Automatic Millionaire, I became an automation convert. I began trying to automate as much of my financial life as possible. This frees me from constantly juggling bills. More importantly, a portion of my money is automatically moved into savings before I am even tempted to spend it.

Set Your Eyes on the Prize

I can’t tell you the number of times that I’ve starting something at full speed but then gradually lose motivation. It’s easy to become discouraged if you don’t see impressive results quickly. This is why commitment is key. During that first year investing $5 per day, you may only see a small increase and doubt that you’ll truly reach $1 million.

At the end of the day though, you need to focus on the long-term goal and realize that 48 years is not a short period of time.

This quote is about working out, but it is totally relatable to finances as well:

“The results you see will highly depend on your discipline in life. Consistency is the key to success.”

If you don’t know where to begin when it comes to investing, Wealthfront is a great robo-advising service that does the work all for you. You can read my review below.

So readers, did you know $5 per day could lead you to becoming a millionaire? Are you able to save $5 per day? Share your thoughts below.