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What Does $1 Million Cost?

By Edited Mar 20, 2016 0 0

What does a $1 million cost?

That’s a big question.  One that can’t really be answered, or can it?  I think it can and I'm going to try to answer it here.  

A million dollars, in my opinion, cost money, consistency, and time.

Money + Consistency + Time = $1 Million

Sounds too simple, right?.  Well let me explain.  If you save $100 (that’s the Money) each month (that’s the consistency) and Invest it and get a 10% annual yield for 45 years (that’s the time) you will have  over $1,056,000.00.  45 years. That’s one working lifetime, age 20 - 65. So if you can save $100 each month you will be a Millionaire in 45 years and believe it or not you will have only actually invested a total of $54,000 ($100 x 12 months x 45 years).  

Now lets change things a little and make it a bit more “real world”.  Lets say you get out of college at age 22 and get a job making $40,000 a year which is about the median income in the U. S. You decide to save 15% of your income each month ($500) and you get a 10% yield.  You do this until you’re 65.  At age 65 you would have over $4,319,000.00.   That is just amazing, right?  That’s nothing when you think about how much you actually invested into this retirement fund.  You have only invested $258,000. The rest is all interest.   This also assumes that you are a terrible worker because in this example you make $40,000 every year, never getting a raise or promotion. If you got just even a 5% annual raise it would make this go just completely nuts and you wouldn’t believe how much you’d have at 65 anyway so we won’t talk about it.

It doesn’t have to take that long but if you want to shorten the time you will have to increase your monthly investment.  For example, if you want to have a million dollars in 20 years you will have to invest just over $1,300 a month.  It is also possible to increase your rate of return.  There are mutual funds out there that have a 20 year track record of average annual returns of 20% or more.  I use 10% for all my investing forecasts because it’s just below the average annual return for the stock market since it’s inception. The average is around 12%. So 10% should not be unattainable. In my $40,000 income example above if you did get a return of 15% you would have over $24 million.

So, what does $1 Million cost?  

Money + Consistency + Time

So every one can be a millionaire you just have to consistently invest money and time.


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