Reaching seven-figure status isn’t as hard as you may think. In fact, some say that “millionaire is the new middle class.”
To illustrate just how attainable the dream of becoming a millionaire could be, personal finance site NerdWallet created a chart showing how much money you need to set aside each month in order to have $1 million saved by the time you’re 67.
The chart assumes you’re starting with zero dollars invested. It also assumes a 6 percent average annual investment return, which is fairly conservative: The average return on long-term investments is around 10 percent annually.
The amount you have to save depends heavily on how early you start. NerdWallet listed the savings amount needed for the starting ages of 23, 30, 35 and 40. As the chart shows, the sooner you start putting your money to work, the less you’ll have to save each month, thanks to the power of compound interest. Compounding makes a sum grow at a faster rate than simple interest, because in addition to earning returns on the money you invest, you also earn returns on those returns over time.
Here’s how much you have to save each month if you start at:
Age 23: $415 (about $14 a day)
Amount you’d save: $219,535
Your investment return: $780,955
Age 30: $651 (about $21 a day)
Amount you’d save: $289,695
Your investment return: $710,464
Age 35: $912 (about $30 a day)
Amount you’d save: $351,120
Your investment return: $649,797
Age 40: $1,300 (about $42 a day)
Amount you’d save: $422,500
Your investment return: $577,934
Ready to put your money to work and build a seven-figure portfolio? The simplest starting point is to invest in your employer’s 401(k) plan, a tax-advantaged retirement savings account, or other retirement savings accounts, such as a Roth IRA or traditional IRA.
You can also research low-cost index funds, which Warren Buffett recommends, and online investment platforms known as robo-advisers.
And remember, when you start saving outweighs how much you save.