How to Save a Million Dollars in 5 Years

If you knew that working twice as hard over the next five years would leave you with $1 million in savings, would you take the opportunity? The number might seem impossible, but it’s achievable for some. To save $1 million in five years, you will need to calculate how much you need to save and identify the types of investments that can help you reach that goal. Use the tips below to start your journey toward $1 million. You can also work with a financial advisor who can help you create a financial plan in order to achieve your goals.

First, Create a Plan

Setting a goal of saving $1 million allows you to orient your plan toward your target. A solid financial plan includes your income, expenses and savings deposits. However, instead of choosing an arbitrary number for your monthly savings, it’s important to use an investment calculator to understand how much you’ll need to save on a weekly, monthly or annual basis to reach your goal.

Say you opened an investment account today with $100 and contributed $100 per month. With a 5% interest rate, your account will grow to $83,673 after 30 years. While you might have been disciplined with your deposits, your contributions and interest earnings clearly wouldn’t be sufficient to reach your goal. As a result, you’ll need to do some number-crunching to create a plan that will get you to $1 million within five years.

If you could guarantee that your money could grow at 5% per year, you would need to save more than $14,700 at the end of each month for five years in order to hit your $1 million savings goal. If your investments could grow at 10% per year, you would need to set aside approximately $12,900 at the end of each month for five years.

Tips for Saving $1 Million in 5 Years

how to save $1 million dollars in 5 years

It’s not an easy task to save $1 million in a short time period. Five years isn’t a long time unless you have a significant income. With that in mind, we’ve put together a list of six tips you can use to help you move closer to your goal.

1. Capitalize on Compound Interest

Earning interest on your investments is valuable, but earning interest on that interest can help your account increase in value exponentially. In other words, compound interest turns paid interest into more money to invest.

2. Leverage Your Job

A job paying minimum wage with no opportunities for growth probably won’t help you get to $1 million. As a result, you might need to look for a job with higher pay, growth potential, a benefits package or a combination of all three.

Finding a suitable job might necessitate a career change. Fortunately, numerous lucrative options are available for those looking to switch jobs. For example, you can take advantage of courses and train to become a full-stack software developer within a year. But, whatever you choose, it helps when your employer offers a 401(k), especially if they provide matching contributions.

3. Establish Daily, Weekly and Monthly Savings Goals

Saving $1 million can be a daunting goal, so breaking it into manageable chunks can help. Getting into the habit of saving and investing at set intervals can help get your account rolling, even if it means starting small.

For example, if you’ve never saved money before, setting a monthly savings goal of $50 can help you get into the groove. If this number seems like too much, you can break it down further to transferring $1.67 to your savings account or IRA every day to reach your goal.

Regular financial check-ins can help you monitor your progress and make adjustments. For instance, if you get a raise or finish paying off a debt, you can direct that extra money toward your savings.

4. Identify Ways to Increase Your Income

Increasing your income can help if you’ve already minimized your expenses but still struggle to invest. For example, if you’ve put in several years in your company and haven’t gotten a raise recently, asking for a raise can put more investment money in your pocket.

In addition, a side hustle can also boost your investing potential. Whether you rent out a spare room in your home or take a second job on the weekends, you can turn spare time into a second income stream.

5. Find Simple Investments to Grow Your Money

Reaching $1 million requires straightforward, cost-effective investments. Low-cost exchange-traded funds (ETFs) and mutual funds, especially those that track major indexes like the S&P 500, can help you diversify your portfolio while keeping fees low.

In other words, these accounts diversify your investments, lowering your risk while giving exposure to profitable companies. In addition, they use the passive management style, so you won’t pay exorbitant administrative costs. To assess the risk of a specific fund, you can research its past performance and choose more reliable accounts, such as an index fund for the S&P 500.

6. Cut Expenses

Your monthly budget likely includes excess spending that could go toward investments. For instance, that extra streaming subscription or weekly night out might cost you hundreds of dollars that could be earning compound interest instead.

If you’re struggling to reduce spending, a helpful strategy can be to pay yourself first. In other words, deposit your target savings and investment dollars first. That way, you’ll have to make ends meet with the remainder of your paycheck and will have less room for impulse purchases.

Focus on Long-Term Financial Stability

Another useful approach to managing your finances is to focus on long-term growth. When the going gets tough, reminding yourself of your motivation can help you continue. Remember, your goal isn’t to cut your cable bills or eat out less; those are both means to financial freedom. Your goals are bigger than that.

Saving $1 million in five years is a lofty goal, but doing so may allow you to live off the interest payments of your nest egg. Hitting your savings target can give you more flexibility in life, whether it’s continuing to work and build wealth, taking time off to travel or pursuing a new, more fulfilling career.

That said, financial planning often requires balancing long-term stability with short-term needs. There may be times when focusing on a near-term goal like paying off high-interest debt, covering an emergency expense or supporting your family takes precedence. The key is to make those decisions with your broader financial picture in mind, so that short-term actions support, rather than derail, your long-term progress. Consider working with a financial professional who can help you weigh both sides and build a plan that protects your future while meeting your present goals.

Bottom Line

While it may be challenging to achieve, you can build a $1 million fund by steadily increasing your savings, investment contributions and income. It also requires discipline across multiple areas of life, including budgeting, working extra hours, cutting expenses and increasing your financial knowledge. It’s been said that the hardest things in life are also those worth doing. If you succeed, your endeavor will be worth $1 million.

Tips for Boosting Your Savings

If you’re having trouble organizing your money, a financial advisor can help. An advisor can help you create a financial plan and even manage your assets to help build wealth on your timeline. Finding the right financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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