The New Year is here once more. What could be a better resolution than to ‘save more money in 2021’? Below are some tips that can help you maximize savings and be on your way to becoming a millionaire. A six-figure job is not even required! As long as you start saving early and mind all your spending, you will be on your way to put away a million dollars on your bank account.
1. Save now.
The easiest way to increase your savings is to start as soon as possible. This allows you to harness the power of compounding. For example, if you contribute $500 a month or $6,000 to an IRA every year for 40 years starting at 20 years old, your total investment will amount to $240,000. Assuming a 7% return, this money will grow to $1.37 million through the power of compounding. You would be a millionaire at age 57 just by saving $500 a month.
2. Save at least 15% of your income.
How do you calculate savings? Do you put away a certain amount every month or do you just save what is left after your spending? If you are to become a millionaire, you must pay yourself first. How much exactly should you save? According to finance planners, you must save around 15% to 20% of your annual gross income. It may be unattainable for some people now, but keep working consciously in this direction and you will achieve this level eventually.
3. Stop buying things you do not need.
Before clicking check out, ask yourself if this item is something that you really need. Even better, ask yourself if you want this more than you want to become a millionaire. Putting your purchases in perspective is critical to maximizing your savings and building wealth quickly. Every dollar you spend is one less dollar that you can invest or save. Review your spending and look for ways to cut costs. The more you save in your budget, the closer you are to reaching your $1 million goal.