How to Become a Millionaire for $44/month

Ready to nerd out? I was recently playing with investment calculators, like you do, and I went down the rabbit hole of various ways to become a millionaire. We all know it’s better to start investing early, but how much of a difference does it really make? Spoiler alert: A shit ton.

This is a quick read, so let’s get to it.

Four Investors and a Baby

So we’ve got these four people and a baby, which are also people, so, five people. Each one of these five people want to reach millionaire status by the time they turn sixty-five. Let’s meet our crew.

So Jaiydeyn (pronounced Jay-den) had cool millennial parents who wanted to give him a name with a unique spelling, but didn’t bother to teach him about investing, because of course they didn’t. So Jaiydeyn waits until he’s fifty years old to start.

Dale has awesome parents, obviously, but most of his childhood was spent drinking Monster Energy drinks and watching the big trucks ram each other and the Nascars go vroom vroom. It’s not until he’s nearly forty years old that he begins to think about investing.

Starburst didn’t have a prayer, because his goddamn name is Starburst. Still, he finds himself, at the tender age of thirty, finally landing the type of job where you wear a tie and invest. His parents are hippies and can’t believe it’s been so hard for Starburst to get callbacks on job applications.  Go figure. Knowing the uphill battle he’s fighting, Starburst decides to take it upon himself to learn how to save and invest.

Charles, our skateboarding twenty-year-old, isn’t too interested in investing at this point, but he’s going to do it. Really, he’s more of a Chuck at this stage in his development, but his parents were adamant they weren’t raising a Chuck. They kept Charles far away from the ol’ racetrack and made him drink bottled fizzy water from an early age to keep fancy enough for the name Charles. He also owns a monocle that his parents keep trying to get him to wear but it doesn’t go with his overall persona, so he’s resistant.

Finally, the most sensible of the bunch, Gary the baby. Gary the baby had parents who not only thought about what his name would sound like when he’s an adult, but they even found a name that is both practical for an adult AND hilarious for a baby. Having parents so on top of things is really setting Gary up in life. Of course they’re going to teach him about investing and get him started before he’s old enough to compile his first spreadsheet.

So those are our characters.

The difference between how much they need to invest each month to reach their goal is staggering. (For all these examples we’re assuming an 8% rate of return.)

Let’s take a deeper dive into each person.

Jaiydeyn The Fifty-Year-Old Investor

 

In order to get to one million dollars by age sixty-five, fifty-year-old Jaiydeyn has to invest $2,950/month. Over those fifteen years he’ll contribute $531,000 of his own money. So, if you plan on waiting until you’re fifty to start investing, you better have about three grand a month to throw at it.

Dale The Forty-Year-Old Investor

Dale starts investing at forty years old, and has to contribute $1,100/month in order to reach one million by age sixty-five. He’ll only have contributed $330,000 of his own money. That’s $200,000 less than Jaiydeyn, who starts just ten years later.

Starburst The Thirty-Year-Old Investor

Starburst, who starts investing at the age of thirty, only has to contribute $465/month to hit the million dollar mark by age sixty-five. During those thirty-five years he’ll only be contributing a total of $195,300 of his own money.

Charles The Twenty-Year-Old Investor

Charles, the cool kid who starts investing at the age of twenty, only has to contribute $207/month in order to have one million dollars by the age of sixty-five. During that time only $111,780 will be from his pocket. Since he’s starting early, he’ll have plenty of money left over for skateboards and cool hats with unbent bills, like the kids are wearing these days.

Gary The Baby Investor

We’d do anything for our kids, more or less, right? Well what if on the day Gary was born his very practical parents opened an investment account for him? How much do they have to contribute each month to Gary’s portfolio for him to have a million dollars once he turns sixty-five?

The answer: $44/month. And, only $34,320 of that is principal.

If you start as a baby, you need to invest less than most people’s cable package to have a million dollars by standard retirement age. Obviously Gary will take over contributions at some point, but getting him through the first eighteen years of life would be a pretty great head start. If you did something similar with your child, who I assume you also named Gary, it would cost you just over $9500. They would have over $20,000 in retirement by the time they turned eighteen.

Now, I realize a million dollars today and a million dollars sixty-five years from now are completely different. Still, over the course of your life you probably won’t really miss $44/month. Plus, this is assuming even during his peak earning years Gary never contributes more than that $44. You just know Gary is looking to optimize. He’ll probably contribute even more.

That’s the power of compounding interest and starting early. You don’t have to be loaded to start investing. Just get started.

Some other fun calculations, just real quick

In the real world it doesn’t help us to know how much money we would have had if we started doing something twenty years ago. The only thing that matters is how long it will take us to get from where we are to where we need to be.

Let’s say you want to get to a million dollars in ten years. How much do you need to invest each month?

Answer: $5,565/month.

Now, that number depends on being in low-cost index funds. I’ve spent a lot of time harping on investment fees so I won’t get into it other than to say for this example we’re assuming you’re in low-cost index funds and your expense ratio is .04%.

Okay, so that’s a lot of money per month. What about becoming a millionaire in fifteen years?

Answer: $2,975/month.

Okay, what about twenty years?

Answer: $1767/month

That feels like enough examples.

Becoming wealthy is possible for most Americans, you just need to save your money and invest consistently. You don’t need to make hundreds of thousands of dollars each year to become wealthy by the time you’re ready to retire. Even a modest income will get you there if you just start. The earlier you start, the easier it will be. But, even if you don’t have anything saved up right now, you can change your entire trajectory in a decade by simply investing.

Thanks for reading this article. Here’s a GIF of my daughter jumping up and down wearing a hat Mrs. Burrito Bowl made. It’s your reward for finishing the article.