Selasa, 02 Februari 2010

How Much to Save to Become a Millionaire?

How Much to Save to Become a Millionaire?

This is the commonest question people ask me when I say them that, it is possible to become a millionaire by regular savings and investing. The obvious question is, how much money anyone should save regularly to become a millionaire one day in his life?

The US Stock market has historically given 11% annual return in the long run. Dow Jones has given 10-11% return every year in the long time horizon (More than 10 Years). So we will assume this rate of return from the US Stock market in the long run for the future.

Now, if you run the compound interest calculator than if you start investing $ 2000 every year in the Vanguard Index Mutual fund at the age of 25 years than after 40 years, on the age of 65 you will have US $ 1 Million of Corpus assuming the rate of return of 11% from the stock market.

Now, What if you save $ 4000 every year from the age of 25? Well, in that case you will become millionaire 10 years before means at the age of 55 years only means just after 30 years from you start investing. Well, see becoming a Millionaire depends on three things.

01) Amount of Money you Invest

02) Amount of Time you Invest

03) Rate of Return on your Investment

Now, What if you Invest this money in something which gives you 20% annual return? Say for Example, The Internet Business? You can expect 20% annual return from the Internet business easily. Well, in that case after 40 years, your $ 2000 invested annually will become $ 40 Million….!!!!

And you will first time become a millionaire just after 20 years means at the age of 45 years (Assuming that you have started investing at the age of 25).

Thus, how much money you should save to become a millionaire really depends on the rate of return on your investments as well as how quick you want to get rich. So Save Accordingly…!!!

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