A few days ago I was poking around Money Reasons’ website and found a banner for the “Million Dollar Club.” Curious as to what the club was and how I could be part of it, I clicked on the banner and was taken to a website called Budgets are Sexy. The editor of the site, J. Money, has created a club for people who are trying to save their first million. His challenge? Create a realistic plan that you can follow to become a millionaire.
I thought this was really cool and decided to join the club myself! However, as a recent college graduate trying to navigate the real world and pay all my bills, I quickly found that it would be quite difficult to figure out how to save enough money to ultimately become a millionaire.
Here is my current plan to save one million dollars:
Max out my SEP IRA
As of right now I am currently self-employed. As a self-employed individual, I can contribute 20% of my earnings to my SEP IRA and get an average rate of return of 6%. But would it be realistic for me to save $700 a month towards my goal of maxing out my SEP IRA contribution? I created a budget and much to my surprise, it is possible!
Each year, this will equate to at least: $8,400+$504 = $8,904
Cut Costs
In order to figure out how to save more money, I re-evaluated my budget to see where I can cut back on my expenses. By doing this, I found just over $80 that I could save each month!
Each year, this will equate to around $1,000
Find Alternate Sources of Income
In order to bring in more money (because let’s face it, the more money you make the more you can save), each month I will try to find an additional source of income to add to what I make at GreenSherpa.
Each year, this will equate to: $2,400
By simply doing these three things, I could see $1 million in my bank account after 34 years. While this does seem like a long time, there are two things I have to keep in mind:
1. I am only 22 years old right now. In 34 years I will be 56. As of today, the retirement age is 65. If I were to open a SEP IRA through Charles Schwabb, I wouldn’t be able to touch that money until I am 60 years old. If I were using my million dollars to save for retirement (which is my goal), this would work out absolutely perfectly!
2. Chances are over time I will make more money at my current job (or any jobs that come after this one), which means I will be able to contribute more money to my SEP IRA. This will reduce the amount of time it takes me to save $1 million.
Even though saving $1 million is a little overwhelming considering I am still trying to figure out how to manage my finances as a financially independent adult, it is encouraging to see that it is a realistic goal! So, even if saving $1 million seems impossible for you to do, figure out your budget and come up with a realistic plan! Like I said, if I can do it, you can too!
What do you think of my plan to save $1 million? Do you have a plan in place to save your first $1 million? Share your thoughts and comments in the comment section!
